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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How do we price a Non-USD currency FX Forward pair by using cross-currency basis for each currency?
For e.g., when pricing a GBPUSD FX-Forward we build the USD SOFR curve through which we get USD risk-free rate. For the GBP risk-free rate, we use the sum of GBPUSD Basis and SONIA. However, if we ...
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What will be the payoff equation of a GBPUSD European Exotic option/FX forward with Notional in USD [duplicate]
Given the currency pair , GBPUSD with
spot price as $S_t$ at time $t$, Strike price as $K$, $I$ is an indicator function indicating if GBPUSD is below the "Knock-in-Rate" at expiry, $L$ ...
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Lend $ synthetically at higher yield using ¥: it works but why?
The Trade is:
You have USD 100m funding
Swap USD for YEN equivalent at today's spot, agree to swap back in 12 months at the USD/JPY forward rate
With the YEN buy a 12 months Japanese Government bond
...
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Sticky delta vs sticky strike
I have been trying to get my head around these concepts but what I have found online has caused more confusion: specifically why a sticky delta model might lead to a higher delta or no. of contracts ...
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Extending/Subclassing QuantLib Classes in Python?
I'm using quantlib via the quantlib-python or open-source-risk-engine both on pypi. The question relates whether it's possible to extend QuantLib term structure base classes in python rather than C++....
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WHAT IS THE FX/OIS SPREAD ? WHAT CAN i USE IT FOR? [duplicate]
What's an example of fx/ois spread , lets say I am looking at BOE , what spread would I be looking at to see the funding stress or to see if year end turns is trading at a premium or now .
I am on ...
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FX FORWARDS Calculating funding cost and wether funding will be expensive or not
Lets say for example my TN for USDHKD point per day spot is -1.9467 and for 1mnth it is -1.4142 and the notional is 100m HKD dollars.
Would you say more or less I would be flat in terms of funding ? ...
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Vega, square root of time, and ATM straddles
Could someone intuitively explain why for say a 1y EURUSD option -
If you buy 100 (50/leg of straddle) of 1y at the money EUR vol, that = sq root of 12 x 100 = roughly 350k of EUR vol.
If you buy 100 ...
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Explanation of Risk Proxies in FX
I came across the following line in an article: "Risk proxies traded heavy despite the rally in rates helping the S&P500 to its 4th consecutive green day." I would like to understand ...
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How to Bloomberg compute the implied Yield ? What is FX swap basis spread?
Question 1:
You can see Bloomberg EUR/USD FXFA<go> page attached below
EUR 3 months yield=3.9412
US 3 months yield= 5.6683
Spot Rate: 1.0580
How does it find FX swap rate as 1.062732?
Question ...
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Assessing the value of risk reversal and the fly
This is important for traders.
What I'm really asking is how do we ascertain if vanna (or dvegadspot) is being valued correctly by the market?
and for the fly, fair fly value will be a combination of ...
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Best practices for building an FX volatility surface with Quantlib in Python
Generally my question is: what are best practices for building FX volatility surfaces with Quantlib?
In FX options, I would like to price structures such as risk reversals, strangles and butterflies.
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Why sometimes fx forward positions are built via spot + fx swap trades rather than outright fx foward trade?
Say instead of directly buying 2m EUR Jan 31,2024 forward, you buy 2m EUR spot and the swap that with Jan 31, 2024 as forward date. Why would transaction costs will be less than the outright forward ...
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FRTB - SA Curvature cross gamma with FX options
Under the FRTB we do an downwards and upwards shocks reating to the each of the risk factors.
FX risk is also calculated as the change in respect to the reporting currency to each of legs of the trade....
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Calculating the Delta of FX option
I'm tying to reconcile the delta value for an FX option. I'm comparing the results to Bloomberg to verify our calculation is correct.
I've looked at this - Quantlib: Greeks of FX option in Python but ...
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FX option premium % from one currency to another [duplicate]
Assuming I am pricing a AUDcUSDp 1w 0.6630, 0.6576 spot, how do get convert the premium in % from USD to AUD? I also realise the premium differs when I select it as AUD and USD in Bloomberg. Is it ...
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Why is the NPV of this FX Forward 0?
I've checked similar questions and answers but even after setting the evaluation date in ql.settings I still get zero. Like another poster, I also have the QL cookbook and have read everything I could ...
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building an em fx forward curve with forward spreads
Like the title suggests, I'm trying to build a forward curve for exchange rates in USD/em currencies. I have certain forward points already, but they're in spreads and ideally, I'd like to construct ...
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Pricing an American FX Option using Quantlib
I need some guidance on valuing American style FX options (spots and forwards) using quantlib in Python. Given the following parameters:
Domestic and foreign risk-free rates
Current market spot and ...
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Typical values Heston parameters for FX options
I am not as familiar with FX options as I am with equity index options.
For the purposes of numerical testing/experiments I'd appreciate if somebody could tell me what are typical parameter values for ...
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Foreign equity call struck in domestic currency
I'm trying to get a solution for the foreign equity call struck in domestic currency, where the foreign equity in domestic currency is defined as $S=S^fX^\phi$ with $0<\phi<1$, instead of the ...
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Hedging of FX combo trade
Say we’re selling a TRS on a local MSCI index denominated in USD and delta hedge it by buying eq futures on that local index denominated in local currency (non USD). Let’s also ignore repo/div/ir risk ...
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Is it okay to fetch market data from platform A and trade on platform B? (Forex)
I am currently trading forex on capital.com but since they don't offer tick data I am considering to fetch the tick data from polygon.io and then trade on capital.com.
Though I am wondering if this is ...
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Bloomberg FXFM: what is the point of knowing risk neutral probabilities?
Among other things, Bloomberg FXFM function allows you to check risk neutral probabilities for currencies. For instance, you can check the probability of the euro depreciating 5% vs the dollar in 6 ...
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Can you actually earn the carry return in FX? [closed]
I know that carry is an important factor to value currency. However, it is not obvious to me how you can actually earn the carry return, and if as a pure currency investor, should not you be ...
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How fast is the forex market regenerated?
I'm doing some statistics in order to evaluate the Forex market profitability.
I first define what I call "regeneration of the market".
For example, the following fictive order-book of ...
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Is there a API to obtain real-time forex data in seconds?
I wanted to get sell, buy and recent trades of a currency in intervals of seconds but was only able to find APIs which offer a minimum interval of one minute (I checked Polygon and Alpha Advantage). ...
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USDBRL Forward Points
USDBRL 1 year forward points are at 0.32 while SELIC (Brazil central bank rate) is at 13.75% and the CDI (interbank rate) is about 11.50% vs USD swap rates at around 4%.
What is the explanation behind ...
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Spot markup on even and mismatch FX swaps
I am a Business Analyst working on a requirement around giving Sales users the ability to add a Spot markup on an FX Swap.
I just wanted to understand the relationship between Trader Spot, Spot Markup ...
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Risk free rate for currency option
I’m trying to price a call option on EUR/GBP exchange rate and it expires in 1 year. Should I use GBP Libor as foreign risk free rate in order to apply BS formula? The pricing date is 02/21/2023 but ...
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Shape of FX Volatility Surface
I'm familiar with the volatility surface for equity options with the smile/skew dynamic and flattening with increased maturity, and the explanation/intuition behind its shape. However, today I came ...
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What is the meaning of Domestic Exchange Rate here?
So I have the following formula for the Pricing of a Quanto Option (see image below).
While I understand this formula pretty well, I am not sure what is referred to as "domestic exchange rate&...
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How a trade influence the forex market?
I'm trying to program a basic forex simulator in order to test strategies. But I don't know how is influenced the market when a position is opened or closed.
For example, if I open a 10 000 000 € BUY ...
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FX Risk Reversal - RHS/LHS - Strike adjustments
I was wondering why ppl use the wordings being „rhs/LHS“ right hand side / left hand side when having an risk reversal for example Long EUR Call / USD Put and Short EUR Put / USD Call. Do they refer ...
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FX-swap market convention question for o/n
Can someone enlighten me regarding the market convention for quoting an overnight fx swap where one leg is USD and today is a USD-holiday (but not a holiday in the other currency)? An example is ...
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FX exposure in foreign equity index futures and commodity futures [closed]
For an US investor, buying an European index futures contract doesn't generate EURUSD exposure to the portfolio, since this trade is equivalent to borrowing EUR and buying the underlying.
Can I follow ...
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How to quickly calculate PV01? Or quickly calculate notional back given PV01 and duration?
is there a way to quickly calculate the PV01 of for example for a swap EUR fix floating 10 years?
And is it possible to calculate the Notional, with a given PV01 and the years of the trades or ...
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PIP Value conversion - How can I convert my Pips? general formula [closed]
So I was wondering, how I can convert for example a 20 pips charge is(Spot: 1.0250 with pips 1.0270) on EURUSD into EURCNH Pips with (Spot EURCNH at 7.3005). Is there a general formula and short-cut?
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How a central bank earns Foreign currency [closed]
Today given the strengthening of USD, many Central banks are trying to lift their domestic currencies by selling their USD holding.
My question is how a central bank earns and save USD in their kitty? ...
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How is implied volatility on future treasuries used to expect Forex volatility? [closed]
I was listening to some traders talk amongst themselves.
One emphasized the importance treasury implied Vol as a useful indicator for forex vol/trading.
I don't totally see the connection.
I have a ...
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FX Long/Short Positions datasource [duplicate]
I was wondering if there is any free resources where I can see/ download total FX long/short positions (size or at least number of contracts) in the market currently?
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hedging out of cross-ccy vol risk using direct ccy options [closed]
Lets suppose a G10 FX vol market-maker starts out with a flat book. During the day, the market-maker bought a EURUSD 1 week ATM straddle from one client while sold USDJPY 1 week ATM straddle from ...
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FX Option Vol Quotes (Days or Days+Time to Expiry)
I understand FX Options are often quoted via ATM, RR, BF for 10/25 deltas. There are many resources that outline how to convert those quotes back into absolute strike space (using spot delta or ...
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Model based PnL explain for FX Options
In FX options the vol surface for a given maturity is usually described by three or five points, I.e. Atm, 25 delta risk reversal and butterfly and 10 delta risk reversal and butterfly. Then models ...
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Vanna vs volga and vega
So the bloomberg article that I'm referring to (Bloomberg. Variations on the Vanna-Volga Adjustment. Travis Fisher. Quantitative Research and Development, FX Team. January 26, Version 1) states that ...
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Volga Vanna Pricing Approach
So when using this method to price exotic options , it's stated that we need to calculate the vanna (how vega changes with respect to change in spot prices) of the exotic option and the volga ( how ...
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STIR Topics: XCCY pricing and trilemma between SOFR, FF & FRA
Question on STIR.
Suppose we sell a 3m JPY swap with spot start date, and we are able to back out the 3m implied JPY forward points (hence swap points), using 3m JPY OIS (3m TONA) and 3m USD OIS (3m ...
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Can a Bond have FX Delta Risk?
Given we know the
Notional
Trade Price
Currency in which the Bond Pays Coupons
FX Rate from Bond Currency to USD
Trying to understand if a Bond can have FX Delta Risk and how it should be computed?
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Pricing FX options on pegged currencies
I'm wondering what's the standard (if any) for practitioners to trade volatility on pegged currencies. Is there any specific convention? I'm thinking situations like EURCHF before the unpeg, how were ...
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Understanding FX forward points and market usage
I've been trying to make sense of how the FX forward market works.
Let's say today is June 13, 2022. And we have the next market info as seen in Bloomberg for the FX cross between USDMXN, assuming mid ...
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