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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2
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3answers
462 views

The relation between exchange rate SDE and respective interest rates

The exchange rate between a domestic currency money market and a foreign currency money market can be expressed as $$ dQ(t) = (r_d - r_f)Q(t)dt + \sigma Q(t)d\tilde{W}(t) $$ where $r_d$ is the ...
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2answers
361 views

Stock Correlation Matrix, Multiple Currencies

If i have a portfolio of stocks from different currencies and i want to generate a correlation matrix from the stocks, how is the correct procedure ? Imagine a portfolio which the base currency is ...
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2answers
83 views

How can currency (USD/TRY) be going up without having a candle before that would close under it?

I am having a hard time understanding how can USD/TRY be going up without having a period before that would close at a point under it. This is from today (2018-10-08 6:12 and 6:50). Is it moving up ...
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1answer
700 views

Implied inverse forex pair bid/ask spread

I just wanted to make sure this was correct: If AUD/USD has bid ask of 0.71999/ 0.72032, that implies there is another (theoretical) pair USD/AUD which has a bid ask of (1/aud_usd_ask) / (1/...
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1answer
103 views

What is the instantaneous FX rate and used for a FX Forward?

Could someone please explain me what the instantaneous FX rate corresponds to and why it is used in the valuation of an FX Forward trade? It is defined as: FX_Instantaneous= FX_Spot-(ON+TN) where ...
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3answers
924 views

Fx Currency Pairs Roll over dates

Is NZD/USD the only currency pair with a different value date roll-over time? Where do you see this? The only information I found so far is from http://www.londonfx.co.uk/valdates.html
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0answers
22 views

Average monthly exchange rates causes translation error in consolidated books

I newly work for a multinational company with a corporate structure such that during consolidation, the books need to be translated multiple times and sometimes back to the original currency. I've ...
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1answer
2k views

Spot/Next and Tom/Next FX forward swaps

could somebody please tell me what is the main difference between Spot/Next and Tom/Next FX forward swaps? I know that both are used to roll spot FX position settlement to 1 day forward but I really ...
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1answer
100 views

Is forex trade set up where profit target is twice as far from stop loss is good strategy? [closed]

I was listening to this youtube video and the author is explaining that good way is to set up forex trades in a way where 10 pips in 'losing' direction (Stop loss) and 20 pips in 'winning' direction (...
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1answer
89 views

When to Choose FX Swap or Forward

Assume we have an exporter who is looking to hedge their USD exposure. How would they decide between choosing a FX swap or a FX forward contract to do so? I understand that a swap has 2 exchanges, ...
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1answer
42 views

Which interest rates (maturity length) should one use for calculating interest rate differential of AUDUSD?

An interest rate differential is a difference in interest rate between two currencies in a pair. It is not clear from the internet articles such as the one below which maturity length should be used ...
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4answers
163 views

Where can I get json currency data feeds every millisecond?

I have been looking for free or paid json data feeds on currencies for long. I have come across: currencylayer.com Oanda XE The problem is that I really need millisecond based updates. Can someone ...
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2answers
604 views

Valuation of open FX-Forward

So called closed FX-Forwards are well known forward contracts where some amount of foreign currency is bought at a specified date in the future for a price fixed "today". Such contracts can be ...
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1answer
116 views

ATMF FX straddle delta

I am trying to price an ATMF FX (say Usdidr) straddle - the fxdelta for call and put leg are quite different with put fxdelta being higher than call delta. (Absolute values) Why would this be the case?...
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1answer
283 views

What is the formula for calculating fair value of currency futures?

Let's use AUDUSD 6A futures contract as an example. How does the interest rate between AUD and USD give rise to the fair value calculation of AUDUSD 6A futures contract? Besides interest rates, are ...
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2answers
301 views

Why doesn't the candlestick bodies align to open/close?

Studying some candlestick theory, I'm repeatedly confronted with pictures where the previous (or subsequent) open/close bodies does not align with what is found before (or following after). This is ...
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2answers
3k views

Computing FX forward delivery dates

I'm looking for a precise definition of how FX outright delivery dates are computed. Chapter 1 of the book 'Foreign Exchange Option Pricing: A Practitioners Guide' (this chapter can be found here) ...
2
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1answer
651 views

FX Delta Volatility

I am looking at a Bloomberg FX vol surface quoted in 10 and 25 delta BF and RR. I know how to convert the RR and BF vols int 10D and 25D call and put vols, but I can't seem to imply a strike price ...
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1answer
248 views

Papers and books related to “Forex” market microstructure

There are lots of papers and books on this topics but haven't seen much specific to forex markets nowadays. Any recommendation on recent papers or books?
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0answers
34 views

forex backtesting spread cost modeling

For professional level forex trading, what is a reasonable estimate of roundtrip transaction costs (I am talking about major pairs, like EUR/USD).
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0answers
197 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}...
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1answer
150 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 ...
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1answer
99 views

Log Differences vs Percentage returns [closed]

When working with a single TimeSeries of Foreign Exchange price data (EUR/USD : OHLC) on a minute by minute level, is it better to use the % difference of the close vs the lognormal difference of the ...
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1answer
97 views

Why is spot FX standard if overnight forwards are available?

A spot FX transaction means agreeing to an FX rate to settle on a T+2 basis. Though there are transactions that deliver/settle overnight/T+1. Why is spot, therefore, the standard benchmark trade, and ...
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1answer
179 views

Choosing the Correct Periods for Yang-Zhang Volatility

I am implementing the formula for YZ Volatility using this link. I am testing it on hourly Forex charts and I'm getting some strange numbers. Taking the 14 day YZ volatility using ...
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1answer
217 views

OpenGamma's Strata - Computational Overhead

I've been looking at the open-source library Strata (maintained by OpenGamma), which is written in Java. Now, upon inspection of the FX Forward Pricer and Payment Pricer I noticed two things: All ...
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1answer
644 views

fx vanilla option's forward delta in single currency

According to Black formula , a vanila fx call option's pricing is $$C(F,\tau) = D[N(d_+)F - N(d_-)K]$$ , where $\tau$ is the time to expiry, $D =e^{-r\tau}$ the discount factor, $F=S/D$ the outright ...
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1answer
186 views

Understanding Forex HFT Arbitrage with different counter parties/ Brokers/ ECN

I came across this in a online lecture. But couldn't wrap my head around it. Lets say I have accounts with two brokers/ECN/STP. Now consider the following scenario for currency pair USD/JPY Broker1: ...
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0answers
49 views

Reverse convertible quanto decomposition

I'm trying to decompose the pricing of a reverse convertible when quantoed. Say my domestic currency is EUR and the stock $S$ currency is USD. The quanto reverse convertible, structured as a ZC bond ...
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0answers
26 views

How does interest parity work with settlement dates?

Interest rate parity is typically proven as follows. Given one unit of a domestic currency, one can either convert it into $S$ units of the foreign currency and invest at the foreign risk free rate $...
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1answer
148 views

Why does the EUR/USD exchange rate is in fact USD/EUR from a mathematical point of view?, why finance does not use the mathematical notation?

I found this answers: https://www.quora.com/Why-is-the-EUR-USD-traded-like-that-and-not-like-USD-EUR, but I'm not quite satisfied, I still do not understand how arranging them according to "most ...
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1answer
505 views

Change of numeraire in options with currency exchange features

FV of an EUR denominated option under "COP" risk measure is given by: $$V_t^{COP} = D^{COP} \mathbb{E}_t^{COP} \left[X_T(S_T -K)^+\right]$$ where $X_T$ is the exchange rate COP/EUR. Pricing the ...
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2answers
283 views

synthetic currency pair

I want to generate price of a synthetic currency pair. For example, I have EURGBP, GBPUSD prices and I want to generate EURUSD price. I preferred to use these already existing currency pairs to verify ...
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2answers
249 views

How should I convert FX Volatility Surface from one base currency to another?

This might be a very simple question but I wanted to understand how to convert FX volatility surface points which are quoted in one base currency to another currency? Eg I have fx vol quoted in EUR ...
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2answers
143 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 ...
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1answer
361 views

Software library: Pricing financial instruments, such as FX Forwards

I am currently reading material on how to price financial instruments such as FX Forward deals. One way of doing this seems to be by calculating its Fair Value³. This value can be split into two ...
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1answer
610 views

Risk of FX Targeted Accrual Redemption Note

What is the risk of investing in FX Targeted Accrual Redemption Note (FX-TARN) ?
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0answers
94 views

Dynamically adjusting the size of a Constant Range Bar (on an intraday fx chart)

Constant Range Bars (CRB) is a type of candlestick charting method that does not draw a new candle every unit of time (like every 1/5/15/30 minutes), but every time the range (high-low) of the ...
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1answer
28 views

Comparing account equity vs maintenance margin on large number of positions

Forex brokers will start liquidating your positions when your account's equity falls below the maintenance margin set by the broker. ...
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1answer
469 views

Known Forex Market Trends

As the title implies, is there anywhere I can find (or would anyone be kind enough to make) a [obviously far from comprehensive] list of known connections between a currency’s trends and world markets....
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2answers
592 views

Test .mql4 (meta trader 4 editor) when the fx market offline

I am coding some simple .mql4 program, you know, the fx market is offline on weekend, and the market will be not shown in Meta trader 4 platform. I wanna test my program in meta trader 4 on weekend. ...
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1answer
2k views

MtM of FX Forward

I had a look at pnl calculation of FX forward but it didn't quite match my question. Say $X_{t,\tau}$ is the USDJPY FX Forward Rate as seen at time $t$ for expiry $t+\tau$. So $X_{t}^{spot} := X_{t,0}...
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1answer
280 views

FX options pricing exchange rate regimes

how can we estimate the impact of a exchange rate regime switch ( from fixed to float) on the options prices i'm talking about the moroccan case (EUR/MAD USD/MAD) options OTC , is there any stochastic ...
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1answer
119 views

Implied volatility of inverse quote

Suppose I have a quote of INR/USD and the implied vol surface is also given. Is it theoritically correct to use to same implied vol for analysis of the inverse quote, i.e. USD/INR. Correct me if I am ...
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1answer
2k views

Valuation of an FX Swap

What is the value of an FX swap? As far as I understand, a typical example of an FX swap would be the following: company A agrees to lend 1000,000.00 euros to B and in exchange B agrees to lend 1000,...
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0answers
32 views

How to delta-one hedge a IRD sensitivity on an intra-day basis (using eg, FX or bond futures)?

I'm looking to hedge an interest rate differential sensitivity (the output from a statistical model of spot FX rates) on an intraday frequency. What is the best way to do it? Important factors ...
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1answer
264 views

On a FX volatility smile, Is a-delta put volatility equal to (1-a)-delta call volatility?

On a FX volatility smile in terms of delta, If I want 95-delta put vol, Is this volatility equal to a 5-delta call vol, and viceversa? Thanks.
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2answers
500 views

FOREX: why does SPREAD peak at 22:00 gmt

I noticed that spread on currency pairs shoots up to 5x larger around 22:00 GMT. Then it slowly goes down back to normal levels around 23:00 GMT. Does anyone know why? thanks!
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1answer
197 views

Convertible Bond in Foreign Currency - Quanto Adjustment

I need to value the following convertible bond: The bond notional and interest is denoted in USD, but is convertible into Euro denominated equity. Normally, I would value such a bond with a ...
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2answers
1k views

Why do we usually use normal distribution and not Laplace distribution to generate stochastic process?

When working with a stochastic process based on brownian motion, the increments have normal (gaussian) distribution. However, it seems that a Laplace distribution, with density: $$f(t) = \frac{\...