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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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1answer
275 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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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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226 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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159 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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120 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
123 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
218 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
260 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
762 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
206 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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56 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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31 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
168 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
612 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
314 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
299 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
144 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
425 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
682 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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109 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
30 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
484 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
611 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
283 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
135 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
3k 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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33 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
311 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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725 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
221 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{\...
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1answer
676 views

Garman-Kohlhagen (Black-Scholes) Formula vs. Bloomberg OVML Calculator

I'm trying to price a European call option on USDJPY. We have that $S = 112.79, K = 112.24, \sigma = 6.887\%, r_d = 1.422\%, r_f = -0.519\%, T = 0.25$. My model, based on Black-Scholes, returns the ...
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1answer
2k views

Are currency hedging costs a function of interest rate differentials?

If I am a Yen investor and want to buy USD asset and hedge the currency exposure, are these hedging costs a function of interest rate differentials between Yen and USD and by extension the spot and ...
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2answers
84 views

Initiating new orders with active “order-session” only?

Is it a must to establish "quote-session" & subscribing to quotes/market data before initiating a "New Order-single(Market-GTC)"? I actually can't see any use of quote-session for trading ...
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473 views

NOP delta is Delta times 10000?

I heard someone saying that "in FX world, NOP Delta is Delta times 10,000", what does it mean ? I take Delta is always the change of option price divided by the change or the underlying, e.g. EUR/USD ...
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1answer
253 views

Dollar Index vs Hang Seng Index: Negative correlation, but what's driving it?

I recently read an article which highlighted that a weaker dollar tends to coincide with rallies in Hong Kong stocks. I did some quick analysis: I calculated monthly returns on the Dollar Index and ...
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2answers
58 views

given a timstamp, tell if Forex NY/Tokyo/London active

I am looking for a [pseudo-]code for the following task: given a [GMT] timestamp, tell which of Sydney, Tokyo, London and New York FOREX session were opened. Weekend, daylight saving time and holiday ...
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1answer
70 views

How to calculate Chande Momentum Oscillator for FX

I am trying to calculate a momentum oscillator for the EUR/USD pair and am confused. A formula I read referenced the sum of previous up days. What is a "day" considered in Forex?
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1answer
1k views

pnl calculation of FX forward

i am trying to clarify the correct method of computing pnl (in base ccy) on an FX forward. let's assume the following notation: S(t) = spot rate at time t df(base,t) = base ccy discount factor (USD ...
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1answer
167 views

What is the dollar zero rate and the foreign zero rate?

These terms are used in a proof that the forward price of a foreign exchange pair (where the base is USD) at time $t$ is $X_t \cdot e^{(r_s-r_f)(T-t)}$, where $r_s$ is the dollar zero rate and $r_f$ ...
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2answers
3k views

How to calculate FX hedged bond yield?

How does one go about calculating a 10 year US treasury yield hedged back to EUR? I vaguely understand this but I think there's two methods 1) Calculate 3-month annualized hedging cost 2) Calculate ...
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2answers
129 views

What's the problem with simple EMA-crossover strategies?

I'm looking at charts of bitcoin here: https://bitcoinwisdom.com/markets/kraken/btceur with the option of displaying a short term as well as a long term EMA. It seems to me that if I were to buy ...
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1answer
81 views

Where can I see the bid stack for FX?

In trading FX binary options on brief tenors like 1 hour, I frequently see the FX price bounce right on the expiry boundary, like hourly or 20 minute boundaries. I would like to figure out if these ...
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1answer
127 views

Interact with FX Connect

I have little to no programming background so please bear with me. I work for a firm that executes our FX trades via FX Connect. I would like to program some logic into FX Connect so that trades that ...
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1answer
316 views

Markov chain Monte Carlo Analysis of FX Options

I recently stumbled upon a paper titled "Markov Chain Monte Carlo Analysis of Option Pricing Models" thanks to another post on this site (see: link). I have the ultimate goal of implementing a MCMC ...
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2answers
277 views

Predicting the Future FX Spot Rates

Say I need to predict what the spot rate between USD and CAD will be in 3 months. What will be the most accurate measure or model that I could possibly use? Does the 3 month forward rate necessarily ...
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0answers
143 views

Net Exposure of FX Future

I'm a software developer currently working for an asset manager in their Risk department. I'm looking at Currency Futures and have a question I was hoping someone could put me right on. If I have a ...
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2answers
493 views

Beta in foreign exchange market

Would it make sense to use a regression to calculate beta for returns on a foreign exchange currency (regressed on a market average of all currencies)? Would the beta make sense? (why/why not) ...
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42 views

VaR of future foreign currency income stream

Assume I have a series of future incomes in a single foreign currency. How do I calculate the total VaR for this forex risk using the volatility method? My first thought was that I could simply add ...