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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91 views

Calculation cross-currency basis

I am trying to calculate cross-currency basis on the 3-month horizon for a certain set of currencies. The formula should be $ccb = F/S (1+y_{foreign currency}) - (1+y_{USD})$ where $y_{USD}$ is Libor ...
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FX option trading questions

Are all FX trades ( RR, BF, ATM)quoted in implied vol term delta neutral trades? If trades are not delta neutral at the initiation does that mean it is speculative trading? Why/ why not?
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FX option trading [duplicate]

Are all trades quoted in implied vol terms delta neutral trades? If trades are not delta neutral at the initiation does that mean it is speculative trading? Why/ why not?
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61 views

What is the difference between Cost of Currency Hedging and the Price of a Currency Pair Forward?

I am looking at Reuters Datastream and all they seem to provide is the settlement price of the CME EURGBP contract (which more or less equals current spot). But what does it actually cost me to ...
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40 views

About Dual Delta of FX option in the paper: FX volatility smile construction by Dimitri Reiswich & Uwe Wystup

In the paper: FX volatility smile construction by Dimitri Reiswich & Uwe Wystup. It mentions the computation of premium-adjusted spot delta as follows (Page 6): As a beginner of FX option, I ...
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37 views

FX Smile Curve Extrapolation

How a smooth smile curve is generated from 5 smile points : 10D RR, 25D RR, 10D SM, 25D SM and ATM? What are the commonly used extrapolation and interpolation techniques? I have seen people ...
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1answer
93 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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32 views

Smile Strangle and Market Strangle

What is the difference between Smile Strangle margin and Market Strangle Margin in fx derivative market? Is it just variation in convention or is there any mathematical relationship between the two?
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31 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 ...
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38 views

Should the targeted rate of return stay the same regardless of the currency?

I work for a european company which invests mostly in the euro zone but also in the UK. I'm in charge with calculating the hurdle rate targeted for these investments. The internal guidelines are for ...
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13 views

FX TARF hedging (target redemption forward)

Lets say client is buying from you eurusd tarf strike 1,16 sell eur buy usd notional per fixing 500k usd leverage 2 first expiry 1 month from now, 12 fixings in total (monthly) full final payout ...
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1answer
69 views

What is FX theta in linear products?

While I understand theta (time decay) in options, I often see theta being computed for linear products as well (outright FX forwards). What is theta in this case then? And how is it different from the ...
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73 views

How do the following aspects lead to U.S. Repo shortfalls

A major theme in the markets this past week has been the repo rate hikes and the sudden disappearance of liquidity. Although most are confused as to the main reason, there seems to be a consensus on ...
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41 views

Currency exchange rate

I'm working with monthly data and I need to use FX rate in my model. I have daily data for exchange rate and not sure how to average it over the month. Should I compute simple arithmetic average over ...
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128 views

Hedging EURUSD with negative rates

I was reading an article and i saw this : Fund managers based outside the eurozone can profit from buying Europe’s negative-yielding government debt thanks to an uplift from hedging the currency. ...
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30 views

Why does change in Sight Deposits reflect Swiss National Bank FX action

I am confused of how the Swiss National Bank's famous FX interventions are reflected in the change in Sight Deposits. Against the backdrop of the ECB meeting, it is said that the SNB has taken ...
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38 views

How to backtest a sample of trades to optimize stop loss on losing trades and profit targets on winning trades?

I have a history of hundreds of executed trades. Given those trades, I want to know if there's a tool or framework that can help me figuring out: What would have been the most cost efficient stop ...
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67 views

USDEUR instead of EURUSD futures for euros owner

If you own euros and you want to be long on EURUSD, wouldn't it be more logical and with less fees to open a position on USDEUR and do a margin deposit directly in euros instead of convert the euros ...
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66 views

real time tick data source

Hello i am looking for a free real time tick by tick data for training and analyzing and plotting forex charts but i am searching a lot and i couldn't find any good data feed provider why there is no ...
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89 views

Expected currency depreciation given sovereign default

A country may default on its government debt (in any sense, e.g. miss a payment) within the next year. How would one estimate the expected (under the risk-neutral measure) currency depreciation by ...
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59 views

FX Spot Delta market standard calculation (Trader View)

I am just writing my thesis about FX instrument and hedging and one question popped up which I can't solve. Maybe it is silly but cant find anything about it how the delta of a fx spot is defined and ...
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119 views

FX Correlation Risk from cross ccy pairs

Suppose you are long a TRYJPY call option. And lets say you can delta hedge using USDTRY, AUDJPY, and AUDUSD. In this case I would delta hedge by buying USDTRY, selling AUDJPY, and buying AUDUSD. If ...
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2answers
130 views

Calculating Cross Currency basis swaps

I am trying to calculate cross currency basis swaps for personal use. I generally understand what they are (essentially swapping one currency for another currency on a floating interest rate basis) ...
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1answer
30 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 ...
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48 views

Cancelable Forward

How I could modeling a break forward or cancelable forward? Could I use Swaption model or only by montecarlo simulation? I have (X-F) for 2Y but I have option to cancel in 0,5Y by a premium price
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97 views

FX Futures pricing formula

I'm reading Paul Wilmott's Introduces Quantitative Finance and stuck a bit with formula $F = S(t)e^{(r-r_f)(T-t)}$ for FX futures pricing. I don't get how to incorporate $r_f$ into the formula, could ...
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54 views

Framework for hedging fx and utilizing correlation between asset returns

Can anyone point me in a direction (research paper, books, ..) which developes a framework/strategy for hedging currency exposure for an international bond portfolio? This paper finds optimal ...
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28 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 ...
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51 views

Basic FX-Forwards trading Guide [closed]

What fundamentals or other factors should one follow to trade currency Forwards intraday?
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149 views

Constructing an FX forward curve

A lot of our clients are currently using interest rate parity as a means of constructing an FX forward curve. For instance, to construct the USD-GBP FX Forward curve, they are using the USD LIBOR, ...
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1answer
43 views

FX Forward last day first day premium

How exactly do you trade the turn of the year/quarter effect (also known as last day-first day effect). How do you track this data, is it directly quoted in the market or is it interpolated?
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55 views

How would one go about pricing a FX future?

What model/equations would I require to calculate the price for a foreign exchange future? This is in an attempt to mitigate foreign exchange risk. Also, how could one measure a business's exposure to ...
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32 views

Option price with underlying growth rate distinct from discount rate

Consider a European style option. The price equation is $$\frac{\partial V}{\partial t} + \frac{1}{2}\sigma^2 S^2 \frac{\partial^2 V}{\partial S^2} + rS\frac{\partial V}{\partial S} - rV = 0 \tag1$$ ...
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66 views

Covered Interest Rate Parity with FX Spot-Adjustment

The Covered Interest Rate Parity for FX is often quoted simplistically as $$ X_T \quad=\quad X_S \cdot \frac{D^{base}_T}{D^{quote}_T} $$ where $X_t$ is the (projected) FX rate at time $t$ (denoted as $...
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Parametric Simulation of FX forwards

I need to simulate FX forwards for risk management (VaR) purposes. The problem is that the FX forwards are derived from : 1) Spot 2) int rates 3) and the basis. So the question is how do you ...
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35 views

Can you derive fx correlations given the historic correlations of base pairs

Say for USDJPY and GBPUSD, I have the historic data and calc the volatility and correlation between these pairs. Because GBPJPY = GBPUSD x USDJPY. Can I calculate the correlation for GBPJPY directly ...
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1answer
74 views

Computing FX forward returns using spot returns and an existing term structure

Sorry for the naive question, I am new to the area. I have YTD spot returns on the USD/GBP pair and a forward yield curve. How would one go about computing the forward returns in 2 years using this ...
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87 views

pricing deliverable vs non-deliverable fx forwards

I am trying to link these two questions together Pricing a regular FX forward This is a contract (say USD vs JPY) where you exchange 2 currencies at maturity at a pre-determined rate, while no ...
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64 views

Achieving desired fx exposure with using minimum pairs possible

Let say my algorithm tells me to get the following positions through opening fx positions: CUR NET POSITIONS GBP 236.96379 USD -310.58000 CHF 0.02000 There are 2 ways to achieve this: Long ...
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50 views

Replicating PNLS of FX Portfolio [closed]

I need to enter a USDCHF position and the size is 1000. However I want to replicate the same portfolio pnl by using USDEUR and EURCHF. I know that due to triangular arbitrage USDCHF=USDEUR*EURCHF as ...
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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: ...
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3answers
288 views

Options Delta Meaning of Term [closed]

not able to understand delta in options. Whilst I understand, it is how much the option moves when the underlying moves by 1 unit, I fail to understand, when someone books a currency option, why does ...
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53 views

How to optimize a series of equations whose outputs are a variable of the subsequent equatinos

The basic question is, given $f(x) = y$ and $f(y) = z$, how can you find $x$ such that $z$ is at its maximum? I can optimize each equation independently, but I do not know how to optimize when ...
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76 views

How can we value NPV for a standard FX Swap?

hope you are all well! Was just wondering how we can value the NPV on the value date for a FX swap - i'm sure it's by evaluating the interest rate payable/receivable from the trade date until the ...
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247 views

LSV model calibration with only few quotes per maturity

At this link I have asked what is the market standard when pricing options in different asset classes. Based on the answers, the standard for FX and equities seems to be the local-stochastic ...
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1answer
128 views

What is the intuitive explanation for the spot risk in an FX swap?

I am familiar with FX swap and the basis/IR risk they carry. However, know that they have a very small spot risk component which arises from the present value of future cash flows different from the ...
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1answer
81 views

Pricing an fx option in the same currency

Let imagine we have an option from EUR to USD priced in EUR, therefore the payoff for a call is: $$\frac{(S - K)^{+}}{S} = K (1/K - 1/S)^{+}$$ This is basically the payoff of a price of a put on 1/S ...
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357 views

Using QuantLib Python to value FX options using stochastic volatility

I would like to use QuantLib (and in particular the python wrapper) to value FX option using the Heston model. Thanks to http://gouthamanbalaraman.com and all of the articles therein : in particular ...
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30 views

Granger Causality Equation between daily Carry Trade returns and daily Stock Market returns [closed]

Could someone please kindly help me in regards to a question on the Carry Trade. What is the most widely used equation for the carry trade including the funding and investment currency and what ...
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1answer
86 views

Volatility surface tenors

I don't think this has been asked before, but are the tenors on a volatility surface out of spot date for the currency pair or out of value T+0?