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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Premium Currency and Volatility

Does the volatility of a Currency Pair depend on the currency in which the premium is paid? For example- will the Volatility of USDJPY change if the premium is paid in USD instead of JPY. Is there any ...
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how to model the volatility of the currency exchange rate

I want to estimate/predict the volatility of the currency exchange rate. I have checked in literature a few models from very simple PPP to econometric factor model forecasting, to GARCH (for ...
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How to optimise Fixed Income portfolio (Yieldbook) based on YTM, duration, rating and exchange rate

I have a fixed income portfolio built up in the Yieldbook and BBG Port. However due to some bad performance of my portfolio compared to the benchmark I would like to build up an optimisation which ...
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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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Is this how stock trading works?

I was told to move this question here from Money Stack Exchange, where some people have already provided some feedback. This is a very basic question about the Stock Exchange, and I was looking for ...
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FX implied yield

Emerging market currencies like IDR, INR, its fx implied yield generally rise in a stressed environment. While for KRW, fx implied yield usually drops in a stress environment. I would assume KRW ...
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57 views

Forex trailing stops - better alternatives?

I've been pursuing the holy grail of trading, short term FX trading, using machine learning. I've experimented with a ton of strategies but mainly those revolving around holding each trade for a ...
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56 views

Do I use the bid or ask time series to build a model to predict forex and for a backtester

In my tick feed I get real-time bid and ask prices like below from oanda. My question is this. Lets assume I build a time series model to buy eur/usd in the Oanda UI manually. If I were to build ...
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Is there a scientific significance to Fibonacci numbers in economics?

I am new to the field and have read popular articles on Fibonacci numbers, but I did not find it grounded in academic research and would love to know if there is a research basis for this and whether ...
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Is there a way to formulate a Martingale series that will never explode?

Martingale's betting method can be seen here:https://www.investopedia.com/articles/forex/06/martingale.asp My question is if there is a way to put a non-exploding martingale, [There is one attempt to ...
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39 views

aggregate and convert tick-by-tick using fx data

I have tick-by-tick data of an asset X denominated in EUR and minute-by-minute data on EURUSD. If I wanted to convert my tick-by-tick data to USD would it make sense to just consider every bucket of ...
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1answer
80 views

FX Forward rate agreement valuation in quantlib

I am trying to value an FRA in quantlib Python using the below code: ...
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Reliable weekend forex source that can act as credible data for Monday APAC morning forex trade

In general most of the forex market closes by 10:00 pm london time on Friday and opens back on Monday morning APAC time , somewhere around Sunday evening London time. I am interested in knowing if ...
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How do we compute FX volatility for any given FX strike and time to maturity?

I want to implement a function which is passed two inputs: a strike and a time to maturity (which can be arbitrary within a specified range) and returns an FX volatility for this strike and maturity ...
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38 views

How do I calculate FX forward hedge ratio?

Suppose I have a USD holding of 1,000,000 in my portfolio and I want to convert it into EUR in a month's time. I enter into a FX forward contract of the same amount USD 1,000,000, meaning that I have ...
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49 views

Foreign-Domestic Symmetry

I try to find the proof of the theorem of Foreign-Domestic Symmetry for FX options, but I did not found, Some paper or book, where it is explained? Theorem 2.1 in this paper: https://arxiv.org/pdf/...
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Is the differential between risk free rates the drift of an exchange rate only in the risk neutral world?

Take for example this passage from "Monte Carlo Methods in Financial Engineering". Is this a result of the risk neutral world or is this the real world drift as well? I've never seen the explicit ...
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Hedging With Zero Coupon Bonds from The Concepts and Practice of Mathematical Finance by Mark Joshi

In section 2.5 he describes an example of arbitrage-free pricing (attached below). I have a pretty solid understanding of how we arrived at $K' = K\frac{1+d}{1+r}$, but I got a little lost when he ...
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47 views

Is “time value of currency” to be accounted for in returns calculation?

A simple question: When exchanging currency in order to finance an investment, is it standard/best practice to adjusted for exchange rates when calculating the NPL of that investment? For example: I, ...
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71 views

FX convention and volatility calibration

In general, call/put options are quoted with respect to their Black-Scholes volatility. In the FX market we define the risk reversal volatility as $$\sigma_{25-RR} = \sigma_{25-Call} - \sigma_{25-Put}...
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Converting time bars to tick bars or volume bars in python

Recently I've started reading Advances in Financial Machine Learning by Marcos Lopez de Prado. In the second chapter the author defines some essential financial data structures, like tick bars, volume ...
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LIBOR OIS equation - Discount factor

I've seen this equation floating around : XCCY = FX OIS + USD LIBOR/OIS - EUR LIBOR/OIS. This equation is intuitive however there's a mention that discount factors between the two need to be taken ...
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FX ATM-volatility quotes

Is the implied volatility ATM the same for a currency pair as for the inverted currency pair. I.e, can I expect the same volatility quote ATM for (for an instance) EURUSD as for USDEUR? And does this ...
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FX quoting convention

I saw the quote as this: EUR/USD 1m ATM 0.3150/0.3190. I guess these are vol levels. What the units of these bid and offer quoted?
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What are CloseoutBid and CloseoutAsk Prices?

Using Oanda's streaming API I get typical output as shown below: ...
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1answer
32 views

Compute Forward Exchange Rates using Risk Free Rates

In the following image : I am not able to understand how, the final value of strategy B can be equal to $e^{r_{GBP}T}F(0,T)$ According to me it should be just $F(0,T)$ My reasoning is that when you ...
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1answer
84 views

Dollar basis calculation. Where do I miss the point?

I read that recently, due to the covid-19, the pressure on the dollar market has risen significantly on the demand side. That is why the dollar basis became largly negativ. https://www.bloomberg.com/...
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FX Smile Polynomial Fitting

I am unable to reproduce the example of FX polynomial smile interpolation on page 59 of the book FX Option Pricing by Iain Clark shown below. Consider just the ATM volatility as a specific case. I ...
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FX swap trade question

(a) today, say I did a fx swap trade: long PHP/USD spot and short 1m PHP/USD forward. Then if 1m PHP interest rate goes up, I should make money (meaning i locked in paying a lower 1m PHP interest rate ...
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83 views

How to calculate the Fx Forward Points for 3M

I'm trying to find the FX Forward Points for 3M, the same as in the table. However, in the conventional way (Forward points = Spot x (USD Rate - EUR Rate) x 90/360) I get a different result. Can ...
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99 views

Where does the 50.14348112 coefficent in the US Dollar Index formula come from?

The formula for the US Dollar Index (DXY) that every resource on the internet provides is: $$DXY = 50.14348112 × EURUSD^{-0.576} × USDJPY^{0.136} × GBPUSD^{-0.119} × USDCAD^{0.091} × USDSEK^{0.042} × ...
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118 views

FX Swap P&L question

I am currently trying to compute the P&L of a FX swap and to understand it's implications. Let's say when we sell 1M EUR spot eur/usd at 1.08 and at the same time buy a one month month forward ...
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475 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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Pips calculation based on trade units and Unrealized Profit

The OANDA API allows me to easily see the Unrealized/Profit Loss in units of my home currency (U.S. Dollars) on each trade and the number of units associated with the trade. What I am not able to ...
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68 views

Implied cost of borrowing USD via an FX swap

EURUSD is quoted at 1.0879/84. Lets say O/N forward points are quoted at +0.032/+0.332. Lets say based on these quotes I want to derive my implied funding cost (USD interest rate) if I wanted to ...
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Effect of lowering benchmark interest rates

On recent days, Yen appreciated 30 bps towards USD "after the Central Bank lowered its interest rates by 50 bps". Can someone explain me the economic rationale of the appreciation after a central bank ...
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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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1answer
66 views

Alternative strategies for hedging customer FX positions in spot market

Generally, if an FX broker decides to hedge a customers' position, it automatically hedges the customer's trade to Liquidity Providers when the trade occurs in the spot market. Let's say, the customer ...
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4answers
101 views

Where can I retreive the end of day fx prices?

I'm developing a reporting tool and I need a data source for end of day price data. For example, it should give me the XAUUSD price at a specific date, say 2019-12-05. Do you know such a data source? ...
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Link between spot and forward rates in no-arbitrage world

With reference to the forward exchange rate definition, let be: $S$: the spot rate $F$: the forward rate $r_d$ and $r_f$: respectively the domestic and foreign interest rates $DF_d$ and $DF_f$: ...
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What trading granularity has the strongest self-influence on Forex market?

As I understand, the effects that influence the Forex prices (for the major pairs) can be described as: inside effects - short term speculations by humans/robots real world events - larger scale ...
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208 views

Why is the hedging cost using forwards $\frac{F-S}{S}$ and how is this related to Carry?

I'm a bit confused about hedging a foreign exposure and how this is related to carry. I've read that the hedging cost $h$ is $$h=\frac{F-S}{S}$$ where $F$ is the forward and $S$ is the spot price. ...
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How do FX brokers decide to hedge or book a customer's trades?

FX brokers try to be more profitable by, - booking(b-book) the traders that are predicted to be losing money according to the trader profile or trading history. so, if the customer loses money, the ...
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1answer
416 views

Calculating FX Swap Points from various interest rate curves (and vice versa)

I have tried extensively to find the answer to this both on this website and externally. My question is 'how are FX swap points determined?' but would like to lay out my own understanding first (also ...
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Payment Gateways' market risk: where does it come from?

Companies like Square and Adyen and Paypal are flourishing. They facilitate payments between people and business in various currencies and provide small loans. However as they are not banks they are ...
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Why are some currency pairs more volatile than others?

Why for example GBP/JPY is twice volatile as USD/JPY ? ... and many more cases involving other major forex pairs here: full list. thanks in advance!
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How much to hedge if borrow in EUR to buy USD assets?

Suppose an investor borrows EUR1m to buy USD stocks. He wants to hedge away the currency risk through EURUSD futures. He should go long EURUSD to hedge this risk. The question is how much of EURUSD ...
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What is the actual instrument traded with retail FX brokers

This question may seem inappropriate for this StackExchange but it's the pricing and actual return dynamics that define the instrument so you guys seem the most knowledgeable on this topic. I was ...
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How would a FX price probability distibution function look?

I would like to see how the currency price levels are distributed in a probability function. But I don't even know if there is such a thing or if perhaps its just common knowledge and readily ...
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Extreme AUDJPY FX vols

I'm seeing levels of -12% of market strangle vol at 25 delta for AUDJPY at 20Y onward that is causing havoc with my pricing routines, the 10 delta market strangle is trading around -6% which is again ...

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