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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4answers
381 views

ARIMA model coefficients from discontinuous data series

Stock prices are not stationary processes during all week or all day. For example EURGBP has low variability at night in Europe but during working hours is changing much more dynamic because of market ...
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1answer
140 views

Should a strategy backtested against three years of tick data continue to produce positive results?

Let's say we have a Binary Options 5-minute trading strategy that relies on multiple indicators and exploits price reversals in currency pairs. Now let's say there is a combination of inputs for the ...
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2answers
459 views

Forex trading scenarios - calculating units

I'm trying to build an automated forex trading system and I'm trying to understand how to calculate the number of units I should specify for each trade in different scenarios. Say for example I have ...
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1answer
140 views

Relationshiop between central bank official currency rates and spot forex

Central banks publish official figures for domestic interest rates, as well as spot currency rates for a few select countries (largest trading partners). To prevent arbitrage, I "expect" that in the ...
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1answer
2k views

hedging two bonds in different currencies with FX forward

Is there a way to make a hedged portfolio using two bonds, one is in EUR, the other one is in USD and FX forward contract? Assume that FX rate follows geometric Brownian motion movement.
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1answer
106 views

Funding foreign asset purchase with repo

https://www.bis.org/publ/qtrpdf/r_qt1709e.pdf extract from page 38 An investor wants to buy a foreign currency security with domestic cash but does not wish to run FX risk. Then, three transactions ...
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2answers
64 views

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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1answer
283 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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1answer
395 views

What does **Long Call EURUSD** mean?

What does Long Call EURUSD mean? Does it mean Long Call EUR and Short Put USD? When we draw payoff do we consider only w.r.t. to CCY1 i.e. EUR in this case?
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2answers
476 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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1answer
147 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
882 views

Calculate Exponential Moving Average for a specific time frame

I am writing code to calculate and plot the Exponential Moving Average(EMA) for different chart timeframes(tick/1M/5M/1H etc). I found the formula for calculating EMA: EMA = Price(t) * k + EMA(y) * (...
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1answer
1k views

FX volatility quotation

I am attempting to calibrate my SV(heston) model to market data. My intention is to minimize the difference between market IVs and my model's IVs. I use Bloomberg to get the data, however fx options ...
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1answer
566 views

SABR model: from calibration to mapping the smile/skew in a graph

Let's say that I have a calibrated SABR model in FX market (eg for Eurodollar options). So I have estimated values of beta, rho, alpha, and vol of vol. How do I map the calibration in a (strike, vol)-...
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1answer
2k views

Pricing of swaps

I have a (hopefully) elementary question about forex swaps. Most feeds will have a near and a far leg (or more legs for more exotic swaps). I appreciate that "buying the swap" involves locking in ...
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3answers
237 views

FIX latency and clock syncronization

We are trying to see latency from our server to different LPs . For that we are checking sendingtime value (from them) and current clock in our server. What we saw is difference of +-20ms between ...
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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
162 views

How does trade deficit affect the economy of a country

How does trade deficit for a prolonged period(say 10-15 years) affect a country's economy? I have read that it should affect it adversely, but the US trade deficit has been negative since the mid 1960'...
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2answers
224 views

How current prices is formulated in markets?

I can't understand how immediate prices are formulated in stock & currency (Forex) markets. I have been informed that every tick means one new deal that closed in current price, but this can't be ...
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2answers
613 views

One bar look-ahead backtesting

Suppose you backtest the EUR/USD (or GBP/USD) forex pair with this system on the 1min timeframe: 1) Enter the market at any time n: go long if the "future" bar n+1 has a higher close as the close ...
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1answer
69 views

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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2answers
149 views

FX Forwards collateral and discounting

What is the market convention for discounting the future cash flows of FX forwards? In particular, I would be interested to know what discounting curves are used for both collateralised and not ...
2
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1answer
276 views

Calculation cross-currency basis

I am trying to calculate cross-currency basis on the 3-month horizon for a certain set of currencies. The formula should be $ccb = F/S (1+y_{foreign currency}) - (1+y_{USD})$ where $y_{USD}$ is Libor ...
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1answer
424 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
663 views

What is the intuitive explanation for the spot risk in an FX swap?

I am familiar with FX swap and the basis/IR risk they carry. However, know that they have a very small spot risk component which arises from the present value of future cash flows different from the ...
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1answer
416 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
499 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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2answers
1k views

Calculating Fx Swap from Cross Currency Swap

I am trying to calculate Fx Swap points of a currency pair from the corresponding Cross Currency Swap rate on the same maturity. I.e if I know that my USD/TRY 5Y rate is 16% and my USD/TRY spot rate ...
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3answers
6k 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
223 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
304 views

Traders view on hedging of FX Futures with FX Forward

I would like to get a trades view on hedging a FX Forward with a FX Future by just moving the (1) FX_Spot rate and ignore the other risk factors (2) ccy1 DV01 risk, (3) ccy2 DV01 risk, (4) basis swap ...
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2answers
2k views

Pricing Mark-to-Market Basis Cross Currency Swaps and Subsequently Constant Notional

Currently I'm working on my Master Thesis in Quant Finance in cooperation with a company. I would like to thank you very much for your time and help in advance! In my thesis I want to price Mark-to-...
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1answer
395 views

Pricing and Hedging an Option through a Currency Triangle

How is the option price of an plain vanilla option (in a Black Scholes setting) derived, which is written on, say XAGGBP but practically hedged with XAGUSD and GBPUSD (because these are more liquid)? ...
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3answers
2k views

Volatility Surface for Inverse FX pair / Indirect Quote

I understand that, based on market convention, you can construct the volatility surface of an indirect quote FX pair by flipping the volatility surface of the direct quote around the ATM level. For ...
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1answer
929 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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2answers
390 views

What does it mean to 'receive outright'?

What does the following statement mean: "after accounting for levels of market volatility, we favor receiving outright in 6-month forward-starting 2-year swaps."? Specifically, what does "receiving ...
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2answers
150 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 ...
2
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1answer
192 views

How to distinguish trending/consolidating market conditions programatically?

Can someone please suggest me a method to programatically identify trending/consolidating market condition by reading ohlc data? Currently I'm thinking of checking the current price within last n ...
2
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1answer
2k views

How to create a basket of currency pairs with the lowest correlation in R?

My strategy is designed to buy and sell all assets of a universe and rebalance periodically. It goes either long or short. To limit risk exposure to a single currency I would like the assets in the ...
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1answer
294 views

Relationship between ADR in USD and original stock in GBP - Drift in price

For tax reasons, I switched a position I had in the HSBC London GBP listing into the USD ADR. The ADR represents 5 shares of the GBP listing. My understanding was that since at all times 1 ADR = 5 UK ...
2
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1answer
516 views

What is delta neutral

Does delta neutral portfolio mean you add up deltas of all positions and the sum should be zero? Is this true? Also, in a FX portfolio consisting of FX calls puts and Fwds, if FWD delta is given for ...
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1answer
630 views

hedging with a 3 month fx forward every month

I think this is a bit odd question. Let us say I want to hedge my fx exposure every month but using 3 month forwards . How can I do that ? Is it not easy just to use 1 month forwards ? I recalculate ...
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1answer
99 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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0answers
115 views

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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0answers
201 views

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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4answers
613 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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0answers
135 views

what numeraire is used to price an FX forward contract

By non-arbitrage, it is easy to show the relationship between fx forward and fx spot via the domestic and foreign currency interest rates. I am wondering how we can express this in terms of the ...
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0answers
516 views

Why does change in Sight Deposits reflect Swiss National Bank FX action

I am confused of how the Swiss National Bank's famous FX interventions are reflected in the change in Sight Deposits. Against the backdrop of the ECB meeting, it is said that the SNB has taken ...
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2answers
299 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
1k views

Conversion of a premium-adjusted delta to a strike

I am trying to compute the calibration of an FX market volatility surface, and especially I want to retrieve the strikes from the deltas quoted. I don't have any trouble reverse-engineering the ...

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