Questions tagged [currency]

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Implied forward rate with forward points

I've been studying the application and derivation of a domestic implicit rate in a FX contract when your input are the forward points and the foreing rate. Let's establish some with some ideas first. ...
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1 answer
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How to compare financial statements of two companies working in two different currencies?

So I am conducting a research on applying Data Envelopment Analysis (DEA) for comparing efficiencies of different companies working in different countries and thereby publishing their financial ...
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3 votes
3 answers
192 views

Should Cross-Currency Basis Swaps exchanging risk free rates trade flat?

In the paper "Interest Rate Parity, Money Market Basis Swaps, and Cross-Currency Basis Swaps" by Bruce Tuckman and Pedro Porfirio (2003) the authors claim that cross-currency basis swap ...
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Do currency exchange rates mean revert?

I am trying to understand to what extend holding stocks in a foreign currency (such as USD) in a developed country (such as the UK) over the long term (say, over 15 years) exposes one to currency risk....
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Why would exchange rates follow a geometric brownian motion?

I'm reading Shreve's Stochastic Calculus for Finance. On page 382, he begins talking about exchange rates: Finally, there is an exchange rate $Q(t)$, which gives units of domestic currency per unit ...
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How to generate normalized factor scores for beta exposure

I'm working on building a time series momentum model (TSMOM) based on price alone for currency pairs. I'm implementing a paper that produces a buy/sell signal based on geometric brownian motion and a ...
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-2 votes
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CURRENCY ADJUSTED RETURNS: How to adjust stock returns in foreign currency (e.g., EUR) to local currency (USD)?

I have collected monthly stock returns (in %) denominated in EUR and exchange rate EUR/USD. I am trying to adjust the monthly stock returns denominated in EUR to monthly stock returns denominated in ...
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Simple cross-rate table question

I am trying to self-study and came across this question, I am not sure how to answer this. I think I should transform all of the product's quoted prices to USD then compare them, is that correct? The ...
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Simple three-pair triangulation question

I have a question I came across whilst self-studying and I need to use cross-currency triangulation. I am not too sure how to apply the cross-rate formula, and was hoping someone could show me how to ...
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Currency hedging 3 month sterling libor futures

Each libor contract is 500,000 gbp. Can I hedge it by going short 8 gbp/usd futures per libor to hedge out currency risk considering each gbp/usd futures is 62,500 British pounds?
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1 answer
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Pricing Dual Currency Bond with Forwards instead of Cross Currency Swap

i got the task to price a bunch of dual currency bonds (EUR/GBP/CHF/USD...) and i am a bit puzzled. As the notional of the bond is in EUR but the repayment is in USD, i assumed that for pricing ...
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USD and Gold price correlation

Gold Prices and U.S. Dollar Correlation - 10 Year Chart shows the similar trend for USD and Gold price for the last 5 years. Are there known explanations for the correlation?
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Why can't central bank reserves ever leave the Fed's balance sheet?

I'm reading Joseph Wang's Central Banking 101 and there are two statements which seem to be contradictory to me, and I'm guessing there's an element of misunderstanding on my part which I'm looking to ...
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Is Fungibility Dynamic or Static

I'm trying to work out if fungibility of financial assets / instruments is dynamic (i.e. it can be applied to a subset of the asset or instrument's properties) or is it static (i.e. it can only be ...
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1 answer
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How are currency exchange rates on yahoo finance computed?

I've been looking for the metadata about how the exchange rates on yahoo finance computed, but I cant find anything on the website. Please kindly help me, thank you. This is the example USDIDR=X:
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2 answers
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If the volatility of pounds/euros = .2 do we know anything about the volatility of euros/pounds?

I think the question here is what we know about $\mathrm{Var}\left(\frac1X\right)$. Is this the right question to ask, and if so is there anything that can be said?
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pricing crypto quanto swap and perpetual

https://www.bitmex.com/app/contract/ETHUSD https://www.bitmex.com/app/contract/ETHUSDM21 How do you apply stochastic quanto pricing formulas to quanto crypto futures and perpetuals? I can see couple ...
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Central bank of china foreign currency reserves

https://www.bloomberg.com/news/articles/2021-05-31/china-moves-to-cool-yuan-rally-by-raising-fx-reserve-requirement?cmpid=BBD053121_NEF&utm_medium=email&utm_source=newsletter&utm_term=...
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Benchmarking currency trading strategy

I am backtesting a currency trading strategy where the base currency is the USD. I am looking for a benchmark to compare the results. Since currency trading is an active investment, I do not think ...
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when valuing derivatives, we take into account the CSA. question is, should settlement currency also impact?

eg supposing i have a payoff of 100 GBP on 5/5/2025. and my CSA is USD SOFR. and supposing i have another identical derivative, except it's payoff is 100 * GBPUSD spot (in USD) at 5/5/2025 or that its ...
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QuantLib Python currency conversion

A simple code below to do currency conversion copied from QuantLib-Python Documentation. This is failing in the EUR to GBP conversion (in the last line of code). Thank you for looking into this. The ...
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1 answer
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What is the difference between a non-convertible and a non-deliverable currency?

it seems non convertible (eg CNY) or partially convertible (eg BRL) may be due to capital controls or a currency only used domestically. I was then wondering what is the difference between a non-...
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Second by second stock data from Bloomberg API (or anywhere else that is free) into Pandas Dataframe

I need to compile stock price data for ADR and ORD pairs (and the currency between them) into a Pandas dataframe. My initial plan was use Python's requests library and a free Rapid API account to get ...
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Non convertible currencies and trade

How importers and exporters sell/buys products if their country currency is non convertible or when non residents want to invest in the country? For example in Brazil.
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What determined the weights of a currency in the International Monetary Fund SDR basket(2015)?

I am assuming that the weights of currency in the SDR were establishedby following a transparent process. Are these weights the result of a vote or is there a mathematical algorithm/formula that ...
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1 answer
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What quantifiable factors contribute to the globalization of a currency?

Things that come to mind: Size of the economy of the issuing country, size of population of the issuing country, military power( quantified as defense budget) and country's share in world trade.
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4 votes
0 answers
309 views

FX American call option optimal exercise and holding region

Problem I am considering an American call option which gives a domestic investor the right to buy a unit of foreign currency at a strike of $K$ units of domestic currency. I have an exchange rate $S_t$...
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0 votes
1 answer
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Rolling to a non-front month future contract?

I hedge my US positions with M6B, a GBP/USD future. Every time I roll my contracts, I ask myself "why is there so little liquidity beyond the next three months?" Surely there are people that ...
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When you rollover a FX Forward, do enter the FX swap at the spot rate or previous forward rate?

from below link: https://www.linkedin.com/pulse/distinction-between-fx-swaps-currency-risk-management-akubue-cfa/ "if the date of settlement of the export proceeds has been extended by three ...
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1 answer
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Currency devaluation and banks' solvency

I am quite new to economics and when reading one paper on Russian financial crisis in 1998 came across a sentence: Though temporary successful in bringing down inflation to single-digit annual figures ...
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1 vote
1 answer
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modelling FX with crosses: USD conversion on entry and exit, or just exit?

I am backtesting a model that trades currency crosses (i.e. EurGbp) at a fixed $1 mln per trade and was curious if I need to a) account for my currency exposure to GBP on both ends of the trade or b) ...
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1 vote
1 answer
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Who influences Forex prices and by how much?

May question is probably stupid, however I cannot find some reasonable explanation who (and to what extent) is influencing the prices at the Forex market. Most of the stuff I found on the Internet ...
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Extract individual currencies

I have timeseries for a bunch of currencies. For example, USD_NOK, EUR_USD, EUR_NOK, EUR_SEK and so forth. About 75 of them going back about 20 years in Pandas. My goal is to isolate each currency ...
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Where could I get a mathematical background on circular arbitrage?

I am particularly interested in the dependence of profit on the path length (the number of intermediate currencies) and graphical models / algorithms. More specifically: How can we model currency ...
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1 vote
1 answer
81 views

how to model the volatility of the currency exchange rate

I want to estimate/predict the volatility of the currency exchange rate. I have checked in literature a few models from very simple PPP to econometric factor model forecasting, to GARCH (for ...
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Currency of CDS and adjustment of interest rated for country risk

I have question concered currency of the CDS spreads. In the analysis I am conducting, I perform adjustment of interest rates for country risk (CDS could be a reference to reflect a country risk). ...
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2 votes
0 answers
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Short position in currency forward meaning

Trying to understand what being in a short position of a currency forward means. For example, given a 60-day currency forward at 0.92154 pounds/euro where euro is ...
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1 answer
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How to calculate the Fx Forward Points for 3M

I'm trying to find the FX Forward Points for 3M, the same as in the table. However, in the conventional way (Forward points = Spot x (USD Rate - EUR Rate) x 90/360) I get a different result. Can ...
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2 votes
1 answer
166 views

CDS currency and reference obligation currency

I have been reading a lot of posts on this topic, but still cannot find a definitive answer though. If there is a CDS on a corporate reference entity in a currency denomination, does that imply there ...
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1 vote
1 answer
440 views

why is ADBSC currency positive?

Hi guys I am new to cross currency. Could anyone explain why ADBSC <curncy> (Australian Dollar 3 month cross currency basis) in Bloomberg is always ...
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0 votes
1 answer
186 views

Alternative strategies for hedging customer FX positions in spot market

Generally, if an FX broker decides to hedge a customers' position, it automatically hedges the customer's trade to Liquidity Providers when the trade occurs in the spot market. Let's say, the customer ...
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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 ...
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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 ...
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0 votes
1 answer
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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 ...
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2 votes
1 answer
573 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?
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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 ...
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2 votes
0 answers
193 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 ...
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1 answer
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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 ...
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2 votes
3 answers
156 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 (...
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2 votes
4 answers
1k 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 ...
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