Questions tagged [currency]
The currency tag has no usage guidance.
102
questions
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85 views
How to determine exchange rate dynamics in currency derivatives
I need some guidance regarding exchange rate dynamics in currency derivatives.
Following three dynamics are defined below,
$\frac{dS(t)}{S(t)}=\alpha dt+\sigma dW(t)$ ; the stock dynamics in the ...
0
votes
1answer
64 views
What are “local” and “foreign” interest rate in this formula? [closed]
I found this formula to find fair value of a forex pair:
FV = Spot × e(local interest rate−foreign interest rate) × T
Taken for example AUDUSD,
Spot is AUD per USD.
T is the time to maturity of ...
0
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0answers
44 views
How to hedge payments in a foreign currency?
I´m confronted with solving the following exercise:
"Suppose that now is 1 March. You are a UK based exporter who´ll export products to a U.S. company for 250,000 US dollars and to a French company ...
0
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1answer
32 views
How currency swap works for big companies bond and cash management
Suppose a big company A holds 10 Million USD at T+0, and A knows that it will pay 9.9 Million CHF to buy a bond at T+1, why would company A be willing to enter a currency swap to buy CHF and sell USD ...
2
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1answer
100 views
What does **Long Call EURUSD** mean?
What does Long Call EURUSD mean? Does it mean Long Call EUR and Short Put USD? When we draw payoff do we consider only w.r.t. to CCY1 i.e. EUR in this case?
0
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1answer
46 views
Relation between ATM, RR and BF
In FX derivative market, why does vol spread of ATM > RR > BF? ATM is the most liquid and intuitively it should have the lowest spread. Please help me in understanding the rational behind the above ...
2
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0answers
70 views
Kingdom of Denmark Nikkei put warrants
I have read in a book from Emanuel Derman that Goldman Sachs manufactured a derivative in the early 90's that consisted of buying cheap puts on th Nikkei index (and paid in Yen), combined them which a ...
0
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1answer
55 views
How to understand interest rate bid/ask and apply client mark-up in Tom/Next Rollover Swap Point Calculation
When I am reading materials in swap point calculation for FX Tom/Next Rollover, I am confused with the market interest rate bid/ask.
Using an example:
I traded on ...
2
votes
3answers
117 views
Why do higher interest rates increase the value of the currency?
I've been trying to study about interest rates and foreign exchange. First of all when people say interest rate in this context do they mean interest rate set by the central bank like federal reserve (...
2
votes
4answers
242 views
Which rate to use as a risk free rate in emerging markets?
By looking at Fama and Frenchs global Portfolios, they just use the USD-RF rate as the risk free rate, because they converted their Returns to US-Dollar.
Im currently estimating Strategy Returns in ...
0
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0answers
12 views
Procedure to estimate time dependent volatility of forward exchange rates using correlation matrix of the same
I am trying to compute the Black Volatility of a currency swaption and I am required to draw up a correlation matrix for the forward exchange rates. Could someone guide me as to how I can either get ...
5
votes
2answers
217 views
Currency Hedged Excess Return
In the famous article "Global portfolio optimisation" of Black and Litterman, the authors defined the excess return on currency-hedged assets as the following :
$$
E_t = 100 \frac{P_{t+1}X_t}{P_tX_{...
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0answers
34 views
FX Options Greeks: Is there a meaning in converting the sensitivities values in different currencies?
Suppose you have a Call on JPY, domestic currency is USD
The price will be in USD
Let's say delta = 0.93
Does it make sense for any reporting reasons to convert this value into JPY ?
What is even the ...
1
vote
1answer
58 views
Basic FX-Forwards trading Guide [closed]
What fundamentals or other factors should one follow to trade currency Forwards intraday?
1
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0answers
48 views
How do you hedge with delta futures if payment is unsure?
A Czech company has a payable of 1,5 mil EUR that has got a settlement at the end of the current month and at the same time it is expecting a payment of 1,5 mil EUR at the half of the current month ...
2
votes
1answer
48 views
How are asset backed cryptocurrencies priced?
I am trying to understand the pricing of crypto currencies.
Assuming there is a fictional cryptocurrency that is pegged (say) the Chinese Renminbi and the price of Wheat (the relation being the ...
1
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0answers
64 views
Performance Call on a Futures
I'm not a 100% on when a margin call is on a group of future contracts...
The contract attributes were:
...
1
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1answer
42 views
Why currencies and futures contracts can be considered as assets with known yields?
I understand why stock index can be considered as assets with known yields due to the dividends.
But why currencies and futures contracts can also be considered as assets with known yields?
In the ...
2
votes
2answers
82 views
Group name for currencies, equities and other financial products
I am working on a financial software system that deals with crypto currencies.
This system has a model called 'Currency' that describes for example 'BTC' and market for which there is a 'base' and '...
-1
votes
1answer
47 views
Hong Kong stocks and HSI - Turnover and market cap in HKD?
Hello sorry newbie questions - HSI (Hang Seng Index) and stocks under it, dividend,Turnover and Market Cap always in USD or in local currency HKD?
This is actually a broader questions for Asian ...
1
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0answers
61 views
Do Reuters or Eikon have intraday exchange rate data for minor currencies?
I need historical intraday exchange rate data (for a minor european currency - EURRSD) for my thesis. Not necessarily tick by tick - just prices at any interval below an hour will work.
I guess there ...
3
votes
2answers
298 views
Transform Fama French Returns to Euro
I constructed a global portfolio and calculate it's daily return in Euro.
Now i want to do the regression with the Fama-French daily factor-returns (HML, SMB). However, these returns can only be ...
1
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0answers
242 views
Quanto Factor - FX Forward
In the paper Quanto Options by Uwe Wystup the "quanto factor" $Q$ is used to describe forwards/options when quanto-ed into a different currency, e.g.
$$\text{Quanto Forward Value} = Q \cdot e^{-r_Q T}...
1
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2answers
85 views
credit spread ajustment considering currency
I would like to understand what is credit spread basis currency ajustment.
credit spread implied by a usd bond won't be the same as one implied by a chf bond, isn't it ?
Do you have any elements (...
0
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0answers
57 views
Benchmarking a foreign portfolio with SPY?
Here is something I'm struggling with for a few days now. I'm an European individual investor managing a small portfolio in EUR. However I mainly hold US securities, in USD. I do not hedge my exposure ...
6
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1answer
390 views
Modelling EUR/USD rate with Ornstein-Uhlenbeck model
I have a data set of daily EUR/USD rate for time period 2000-2018.
My goal is to model future behaviour of this financial time series using Ornstein-Uhlenbeck model: $$d X_t = \alpha (\theta - X_t) ...
1
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0answers
229 views
Implied Volatility of cross currency pairs
Been looking for this...
Is there any way we can infer directly, say GBP-JPY's 1-year volatility from GBP-USD's and USD-JPY's?
Many thanks.
5
votes
2answers
192 views
How to find an initial equilibrium benchmark portfolio that includes currencies for Black-Litterman model
We're working on a term project to adjust B-L model to yield robust results. From our readings, we resulted in that initial benchmark portfolio is constructed by using market capitalization weight. ...
1
vote
2answers
90 views
Do we model nominal or real prices of assets?
The answer is probably obvious, but interestingly enough, I was not able to find it in explicit form in the mathematical finance textbooks.
So when Shreve says in paragraph 5.2.2 of SCF-II:
...
1
vote
0answers
41 views
Transform 24hr cumulative volume to sampled periods
I have a Python Dataframe with cryptocurrency data that has three columns: time, 24hr volume and price.
The time is the time at which the data was received from the exchange, price is the last price ...
1
vote
0answers
52 views
Minimum Lower Partial Moment (n=2) hedging ratio
I would like to better have understanding on the minimum-LPM hedging. I have understood that the co-LPM matrix cannot be modeled by GARCH type models that are used to estimate to the covariance matrix,...
4
votes
1answer
160 views
Existential question about currency exchange Risk Factor
Ciao All,
I'm working to a problem about sensitivities for products with several ccy and this questions came out.
For simplicity consider a linear product (a simple cash flow) w.r.t. the ccy ...
1
vote
1answer
323 views
Where can I get Currency options historical data?
where can I get historical data for currency options?
For most part, google gives me links to binary options and other shady webpages.
0
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0answers
47 views
Calculating total market price of security
Typically securities trade on a primary exchange and as such the 'price' of that security is quoted from the primary exchange.
For example Exxon (XOM) stock is listed on the NYSE, even though there ...
2
votes
2answers
144 views
Is order amount related to base or quote in a currency pair?
Say I have a currency pair GBP/USD at rate 1.45, buying 1 GBP costs ...
0
votes
1answer
249 views
Put-Call Parity on Currency and Binomial Trees
I tried solving the below problem without knowing the shortcut of thinking about this in terms of a put versus a call. I can't seem to arrive at the correct answer using my method and I'm wondering ...
-1
votes
1answer
52 views
Calculate price variance caused by denominating currency
I would like to calculate asset correlations while excluding movements resulting from the denominating currency (as much as possible). My common sense tells me that any two assets with the same ...
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0answers
247 views
Decreasing Forward FX rate curve
i've constructed a Forward FX curve using the formula:
$F= Spot \frac{(1+I_b*n/N)}{(1+I_c*n/N)}$
when i get these Forward rates for 1 month, 3, 6 till 1 year i got a decreasing forward Fx Curve
How ...
-1
votes
1answer
173 views
Why would a weaker dollar keep borrowing costs low
I was reading this article and I am puzzled by this phrase:
A weaker dollar has made it easier to sell U.S.-made goods overseas and kept borrowing costs low.
How can a weaker dollar keep borrowing ...
3
votes
0answers
322 views
Regressing non-USD returns on FF 3-factor returns
I am analysing some portfolio returns from the perspective of a Danish investor, i.e. in the local currency, DKK.
I want to regress portfolio returns in DKK on the returns of a 3 factor Fama & ...
1
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0answers
54 views
cross currency swap expiry principal amount
Quick question on cross currency swaps. On expiry, principal payments are exchanged again. What happens when on expiry, the exchange rate is not the same as when the swap was first entered into?
The ...
1
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0answers
32 views
Is there a reliable International Currency Exchange rates provider in JSON format
I am looking for a currency exchange rate provider (preferrably) JSON format , that is free/open and also reliable.
Anybody here have any experiences working with some solutions like this?
Cheers!!
1
vote
1answer
51 views
book of options hedging case of floating rate
i'm an intern in bank at Morocco that sells vanilla options on EUR/USD , EUR/MAD , USD/MAD , it s using delta hedging strategy to cover they're position . But because of the switch to floating ...
1
vote
1answer
141 views
Currency/Forex Hedging using Momemtum Strategy
Mainly the two ways I could find on currency hedging are using forwards (to lock in a future exchange rate) and options. However, I'm curious whether currency can be hedged via some commonly known ...
0
votes
1answer
104 views
fx : HistSim VaR for currency NDFs
I might be asking a very simple question for the FX experts...
I would like to check the HistSim VaR process for a currency NDF.
Given the PV for the product is defined as:-
(f(T) - K)*...
0
votes
1answer
457 views
How to take into account currency risk when optimizing portfolio?
I have a portfolio of foreign stocks. All stocks are denominated in foreign currency. I need to compute returns and risk metrics in national currency which is different from stocks currency. Stocks`s ...
2
votes
1answer
206 views
Option Delta Conversion for currency pairs
Assuming I have a USDJPY put option at strike 100 (1USD = 100Yen) and the delta is D1. What is the delta of a corresponding JPYUSD call option at strike 0.01 (1Yen = 0.01USD) with the same maturity? ...
0
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1answer
329 views
fixed-for-fixed currency swap interest rate discrepancy
I was going through some basic stuff and I found something that I couldn't really make sense of. Lets say that two entities A and B engage in a currency swap. A pays 3% on USD, while B pays 2% on JPY. ...
0
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1answer
2k views
Convert USD yield into EUR yields
I want to calculate the EUR equivalent yield from the USD yield curve.
For example :
how to translate the USD libor curve into an EUR equivalent yield curve ?
Do I need to use FX forwards or is the ...
0
votes
2answers
456 views
Understanding the payoff of currency options
I am self-studying for an actuarial exam and I am having a hard time understanding what happens when a currency option pays off.
Consider the below problem. The payoff at $C_u$ would be $\max(x_u - ...
