Questions tagged [fx]

The foreign exchange market (forex, FX, or currency market) is a global, worldwide-decentralized financial market for trading currencies. Commonly traded instruments include spot, forward, swaps, futures, and options. The FX market is the most liquid financial market in the world. There is no unified or centrally cleared market.

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56 views

Conventions for FX Options

I am looking for conventions (delta, atm, premium adjusted) related to FX Options. For popular currency pairs (e.g. USD EUR) they should be found in Ian Clark's Foreign Exchange Option Pricing. But ...
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26 views

How to find percentage of FX exposure hedged through financial statements

I am analyzing a company's annual report, and wish to find the percentage of FX exposure they have already hedged. I have the following information: The net FX exposure for 4 different years The ...
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45 views

What is 450 pips below spot for USD - JPY currency pair?

I'm new to FX derivatives and I'm trying to price a derivative of USD - JPY pair at 450 pips below spot for USD - JPY. Let's assume that the spot is 109.36; would this mean that 450 pips below spot is ...
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70 views

FX Asian Option Moment-matching in Harmonic case

I need to price a "foreign-paying" fixed-strike Asian (i.e., average) option. Thus, the payoff is: $$\left(\frac{A_T - K}{A_T}\right)^{+} = \left(1 - \frac{K}{A_T}\right)^{+} = K \left(\frac{...
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60 views

Implied cross currency curve

For EM countries without a liquid xccy curve, how I can imply it from local government bonds or swaps?
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158 views

Why has cross currency basis become higher since the 2008 crisis?

The impact of cross currency basis on FX forward pricing has become more noticeable since 2008, diverging significantly from the interest rate differential, what are the fundamentals behind this ...
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65 views

Realized Volatility + GARCH - can I use hourly realized volatility?

I hav minute bar FX data and I am trying to fit a realized variance GARCH model using rugarch. This normally works by providing daily returns and daily realized volatility to the model. Realized ...
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84 views

Equivalence of Call Option on $S_T$ and Put Option on $\frac{1}{S_T}$ in FX Markets

Part 1: I am trying to price an option in the FX world. It naturally pays in the domestic currency, but in this case the payout currency must be the foreign currency. For example, consider the payoff: ...
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100 views

Herfindahl-Hirsch-Index for FX Portfolios

Assume we have an FX portfolio with $n$ currency pairs, such that $w_i$ is the weight of currency pair $i \in \{1, \dots, n\}$ in the portfolio, and $\sum_{i=1}^n w_i = 1$. All pairs have USD as one ...
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53 views

JPYEUR Interest rate parity question

I have some questions related to an interest rate parity question. I have tried to answer them, but would really appreciate if you could let me know whether my answer makes sense or not. I am very ...
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2answers
169 views

How to price the FX forward contract under stochastic interest rates?

Imagine that space Z is exposed to the FX risk (i.e., currency exchange rate risk ), and we aim to provide a hedging solution for that. One choice is to consider a currency-forward contract. I wonder ...
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120 views

How is forex market Quote-Driven?

I am new to the field, and trying to understand structure of spot currency market. As it is stated here, Quote-Driven Market ... only displays the bid and asks offers for a security from designated ...
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78 views

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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120 views

Hedging Renminbi with EUR

Hedging Renminbi with EUR. What is the reason why FX traders sometimes go long EUR to hedge shorts in RMB?
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109 views

Trading OTC FX options: choosing expiries

For FX options that are traded OTC vol quotes are given on a standardised grid, e.g. expiries 1D, 1W, 1M, 3M, 6M, etc. maturity and for each of these expiries you have quotes for ATM, 25 delta Risk ...
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76 views

FX hedged investments

I was reading FX hedged investments do not have an impact on the FX rate. For example, a Japanese fund buying US treasuries fully FX hedged. I understand the hedging is usually done through short term ...
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97 views

Generate FX Carry Return Index

I would like to generate a daily carry return index for a given currency pair - lets take USDEUR as an example. I presume this involves something like taking the spot rate and the appropriate funding/...
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35 views

Futures positioning reported by CFTC

How is the net futures position calculated by the CFTC? For instance, GBPUSD net contract is positive in the CFTC report, what does it mean given that for each buyer there is a seller?
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68 views

India's FX foward market

https://www.bloomberg.com/news/articles/2021-05-04/india-asks-state-banks-to-protect-dollar-assets-on-cairn-concern Based on this article USDINR forward premium has spiked as there is abundant USD ...
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3answers
106 views

How is forex price precision (of the actual floating point number) determined?

I wrote some python code that tries to calculate this by samplying 1000 forex prices using polygon.io's REST api. However, will the precision ever change or is it fixed by something. How do they ...
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202 views

FX Options price vs implied vol

From the screenshot below, what is the difference between the option price by strike in the table versus the implied volatilities by delta in the chart at the bottom? https://www.investing.com/...
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1answer
134 views

FX Hedging costs when using 3m FX Fowards vs XCCY swaps for an IG Bond

Suppose I want to hedge the FX exposure of an USD Corp Bond(held to maturity) to GBP and I can choose between rolling 3m FX Forwards and XCCY swaps. How can I estimate the difference in the hedging ...
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24 views

GET REAL TIME CURRENCY EXCHANGE RATE [duplicate]

I need to get currency exchange rates in real time, every seconds. On websites or when using APIs, the rates are only updated every minutes, or every 30s... Is there any way I can get these datas, ...
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143 views

Currency trades

I usually read statements as the below: "Bank A recommends long positions in the yuan against the Singapore dollar" How are these trades usually implemented? Borrow SGD and convert into CNY (...
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45 views

Covariance matrix for risk factors of a FX Forward contract

Does it make sense to calculate log-returns of interest rates from a zero curve? Context: I'm trying to build a variance-covariance matrix for the risk factors of a USDBRL FX Forward maturing in 1 ...
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93 views

How skewed are FX returns? Does this look like a plausible histogram of EURUSD?

I'm reading about volatility. I've charted the histogram of EURUSD and I am wondering if this looks plausible? What I've charted are the 1-hour percent change returns (not log returns). I've removed 0 ...
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48 views

How to compare or prove economic/statistical similarities between two models with differing independent and dependent variables?

I have two datasets: The relationship between Bitcoin prices and other cryptocurrencies. The relationship between EUR prices and other currencies. What would be the most appropriate way to prove ...
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1answer
77 views

Cocycle Condition for FX and SABR

I was wondering whether SABR model (or some of its modifications) is actually used by practionarers. Also, if one models the FX forward with SABR, would the cocycle condition be satisfied? That is, if ...
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2answers
139 views

Use of CNY and CNH derivatives

I was wondering what are the reasons why investors use USDCNH forwards vs NDF on USDCNY? Do you usually pick CNH for trade reasons, while CNY more for speculation as these are USD settled?
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36 views

Hedge Fund Leverage - FX exposure

how is leverage calculated for hedge funds that follow a global macro strategy. Specifically interested in knowing the FX exposure- forwards or spots. If it’s just Longs+Shorts, then leverage would be ...
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67 views

long position on futures

Now I am opening a long position of 1000000 USD on euro futures at a spot FX rate of $1.2568/€. Technically, this means that I am taking a credit of €795,671.55 (2dp) from my broker and immediately am ...
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132 views

Hedging with FX swaps

I am trying to get the mechanic of the swap rollover. Funds usually hedge FX risk of their long term foreign assets (eg UST) with short term FX swaps (usually maturity < 1yr), by rolling over fx ...
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128 views

How is calculated the futures/forward convexity adjustment for FX?

I could find lots of stuff online for IR derivatives but it seems there isn't too much on FX for this specific adjustment.
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50 views

FX rollover tomorrow next and spot next

One traded a fx spot position on day T (say T+2 settlement). If he wants to roll the fx spot on day T, he will use SPOT/NEXT. If he wants to roll the fx spot on day T+1, he will use TOM/NEXT. Is this ...
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61 views

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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1answer
79 views

FX swap implied yield from bloomberg

I am trying to reproduce the bid EUR implied yield I see in the screenshot below for 1y tenor which is -0.6226%. EUR implied yield bid = spot_bid/fwd_bid *(1+i_USD_bid) - 1 Inputs from BBG terminal: ...
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1answer
47 views

Relation between inflation rate and the exchange rate of the currency

I have been studying the relation between exchange rates and the inflation of the currencies, but I am far from understanding the most relevant factor in driving FX market players from pricing ...
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2answers
149 views

FX Forwards collateral and discounting

What is the market convention for discounting the future cash flows of FX forwards? In particular, I would be interested to know what discounting curves are used for both collateralised and not ...
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1answer
631 views

resettable/MtM cross currency swaps

I am trying to understand the mechanics of resettable xccy basis swaps and put together a numerical example. I'd like to know if 1) periodic interest payments are calculated on the original notional ...
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1answer
110 views

Currency swap terminology

With reference to cross currency swaps, what does it mean to receive the basis? "Demand from Japanese institutions to receive basis (USD funding) increased due to emergency dollar demand due to ...
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1answer
198 views

AUD funding rates

I am looking into into AUD rates and I am a little confused. I tried to summarise below my doubts. FX swap basis (difference between AUD FX swap implied rate and AUD OIS rate). Before covid-19 it has ...
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456 views

FX official rates

How are "official" FX rates calculated? Are these given by an average across all big dealers or brokerage systems (eg EBS, Reuters)?
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99 views

Australian banks funding

"Typically, Australian banks pay a small premium to swap foreign currency into Australian dollars. This premium is also referred to as the basis, which is the difference between the implied cost ...
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64 views

Is there a difference between volume and turnover in the FX market?

For example in equities volume refers to the numbers of share traded and turnover to the total amount exchanged. Was wondering how this applies to FX.
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64 views

Cost of shorting currencies

I thought cost of hedging/going short on a currency with a forward was given by F/S-1 but it seems the author states 0.25% (see below). Am I missing anything (transaction costs, balance sheet costs, ...
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1answer
97 views

FX futures valuation under negative rates

Market participants use negative interbank rates (LIBOR JPY/CHF) for the valuation of FX futures. Does this make any economic sense? Positive rates in valuation formula indicate opportunity cost of ...
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2answers
169 views

Carry trade question

Usually carry trades involve borrowing in a low yield currency and invest in a high yield currency. For example, I borrow dollars and invest in Brazilian real. I then use a rolling FX swap to hedge ...
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2answers
45 views

Is there ever a case where there are multiple ticks (different prices) at the same tick timestamp in Forex?

Say I'm receiving ticks for AUDUSD. The timestamp for Forex tick data seems to go down to a resolution of .001 second (milliseconds). Example: ...
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32 views

Brazil FX market “cupom cambial” [duplicate]

I am trying to understand the role of cupom cambial (onshore dollar rate) in relation to the BCB swaps which are domestic NDF settled in real. "The cupom cambial is priced in basis points as an ...
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42 views

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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