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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976 views

FX hedging: forward rate and implied forward rate

In this paper (box 1 page 24): https://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Bulletins/2000/2000mar63-1brookeshargreaveslucaswhite.pdf It is argued that the forward rate that a ...
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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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2k views

Pricing Uneven FX Swaps

I'm trying to figure out how to price uneven FX swaps. I just started on a FX trading desk and have been told that the all-in rate for a 2-legged FX swap is equal to: 1) Quote for market side of net ...
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1answer
100 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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3answers
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FX Delta Conventions

I'm currently reading Iain Clark's book Foreign Exchange Option Pricing and I got stuck at one sentence in the beginning of Section 3.3 that I feel is important to understand. He writes: FX ...
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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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4answers
16k views

where can i get data for foreign exchange order flow

I need data for my thesis research on liquidity of foriegn exchange for order flow (aggregated daily) per currency traded for a period over the last 10-15 years. help!!
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1answer
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FX Option Price Quotation

I'm trying to replicate the following FX vanilla option pricing exercise (and the conversion between the quote types), taken from Wystup (2006). A call's value today is well-known given by BS / ...
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1answer
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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1answer
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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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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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1answer
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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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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1answer
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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399 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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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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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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210 views

FX Carry Trade and how to calculate it

I am trying to calculate the FX carry on let's say USDILS for a task. I was given the 3M Forward Implied Yield (ILSI3M CMPN Curncy on Bloomberg) and I need to use this in order to calculate my FX ...
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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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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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2answers
121 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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436 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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4answers
615 views

ATM volatility for FX options

I am quite familiar with equity implied volatility and smiles. However, I find it quite confusing and unclear when it comes to FX. I read many materials but could not get a grasp of the notion of ATM ...
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2answers
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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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116 views

When you rollover a FX Forward, do enter the FX swap at the spot rate or previous forward rate?

from below link: https://www.linkedin.com/pulse/distinction-between-fx-swaps-currency-risk-management-akubue-cfa/ "if the date of settlement of the export proceeds has been extended by three ...
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Pricing of a Foreign Exchange Vanilla Option

To understand how Bloomberg prices foreign exchange vanilla options , I extract the following screenshot from its OVML function. The Black-Scholes formua for vanilla options are \begin{split} & P=...
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1answer
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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1answer
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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2answers
115 views

FX swap par value

What is the relationship to apply so that an FX swap value is 0 at inception? For example, for a short 1y EURUSD swap with 1mm euro notional, at inception spot = 1.1000 and 12m fwd = 1.1022, EUR 1y ...
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5answers
360 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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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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1answer
519 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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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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1answer
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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2answers
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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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4answers
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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2answers
334 views

FX Option Pricing Under Basis Adjustment

Given money market rates such as USD LIBOR and EURIBOR and in the context of FX options valuation, I have been reading about the importance to include a so called basis adjustment to one of the ...
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2answers
3k views

Using FX ATM/RR/BF Volatility to Estimate Smile

Suppose $S$ is some FX rate, EUR/USD say, and $\sigma_{S}(K,T)$ is the implied volatility for some option written on $S$, sourced from the surface $\sigma_{S}(\cdot,\cdot)$ (alternatively, consider ...
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1answer
428 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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1answer
206 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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3answers
2k views

FX Option pricing on Forward vs. Spot

In a GBM world with riskless domestic and foreign interest rates, what would be the correct model for a FX plain vanilla option given the statement that this option is priced on the forward? I guess ...
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1answer
135 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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2answers
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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2k views

STIR topics: Implied FX-OIS Basis and FX Forward/Swap Pricing

if someone could provide some clarity on the below: What is meant by 'Implied FX-OIS Basis'? For example: "ON JPY trading at parity, 1W implied OIS basis moved 70BP" and "3M Implied OIS basis moved ...
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1answer
125 views

Difference b/w Spot Premium and Forward Premium for FX Options

Can someone elaborate the difference between the two, and what is the typical convention used in markets? If there is a mathematical relationship. Any helpful links/guides would be appreciated as well,...
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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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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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