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
298 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
329 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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3answers
709 views

how to simulate FX forwards

My question is how to do Monte Carlo simulation for FX forward contracts. Just imagine you have bought a bunch of FX forwards (in various currencies and various tenors) for hedging purposes and you ...
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2answers
154 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
254 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
354 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
790 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
257 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
138 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
179 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 ...
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1answer
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
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
276 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 ...
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1answer
487 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
591 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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0answers
91 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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155 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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362 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
270 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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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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905 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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3answers
169 views

What is the data quality of ask (offer) versus bid quotes in FX markets?

I'm working with high frequency FX data. Because the FX market is a decentralized market, different traders often have slightly different prices at the same moment. I can see how this would ...
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0answers
317 views

is there a limit on how many times i can access fxcm xml feed

i'm writing an python application that uses fxcm's xml feed. here is the link http://rates.fxcm.com/RatesXML does anyone know if there are limits on how many times you can access this data? right now ...
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141 views

Scale of Market Quakes Computation

I would like to reproduce the results in the paper "The scale of market quakes", from T. Bisig, But I am getting stuck at the computation of the Fourier Coefficients in equation (4). They are defined ...
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0answers
74 views

Why does graphic of log first difference of renminbi look similar to hkd?

This is CNY to US$: This is HKD to US$: Below are the log of the first difference of both graphs above: You can see that apparent similarity on the middle of graph. I thought that they were managed ...
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0answers
4k views

Models for simulating FX movements

My goal is to develop a model to simulate long term FX movements. (I am not sure if long term makes any difference, but if it does I am more interested in long term fx movements) These Monte Carlo ...
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0answers
100 views

How to measure if variance is greater at a certain time of day?

I'm not very fluent in the quant vernacular, so perhaps the nature of my question will be better illustrated as a hypothesis. One market has closed and another market elsewhere on Spaceship Earth is ...
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0answers
203 views

How is a quanto priced?

How would one price a derivative denominated in EUR that pays in USD?
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2answers
430 views

How do I get a good mid-price?

I 'm trying to get a mid price for forex data. This answer by alex suggests that I shouldn't simply take ask minus bid. I am not a high frequency trader or market maker. My purpose for the fx mid ...
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4answers
667 views

Market making with resting orders?

I'm still confused on how to provide liquidity on the forex market using passive or resting orders and get the spread from that (selling at ask and buying from bid) And what's the dynamics on the LOB ...
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4answers
419 views

To currency hedge or not to currency hedge (ETFs)?

When is it preferable to use a currency hedged ETF over a none currency hedged ETF? There has been studies which have shown over the longer term currency hedging does not make a difference. "...
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3answers
669 views

Options Delta Meaning of Term [closed]

not able to understand delta in options. Whilst I understand, it is how much the option moves when the underlying moves by 1 unit, I fail to understand, when someone books a currency option, why does ...
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4answers
4k views

Forex brokers with free API compatible with Node.js

I have a Forex trading signal generator written in Node.js and now I am looking for a Forex broker with a free Node.js compatible API. The requirements are simple: be able to send new trade orders ...
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1answer
65 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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2answers
134 views

Trading a planned drop of FX peg

I've been playing around with ideas (not primarily to make money) about what exactly is going to happen when Czech National Bank will leave the EUR\CZK peg? It's been on for roughly 2.5 yrs as a ...
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1answer
215 views

Quanto Total Return of a Foreign Asset into Domestic

Say we have a product that pays the following at expiry $T$: $$\text{Payoff}_{in\ USD} = \text{Notional}_{in\ USD} \cdot \frac{DAXLevel_{in\ EUR}\ at\ t=T}{DAXLevel_{in\ EUR}\ at\ t=0}$$ i.e. it ...
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4answers
2k views

Realtime Exchange Rate Data API

There are various sources for real-time exchange rate data, e.g. Ariva EUR/USD. Is there also an API or other source which enables to automatically retrieve real-time exchange rates as a data stream ...
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1answer
91 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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2answers
181 views

Why do big financial groups use fx swaps to manage cash?

Can someone help me with the logic that big companies' treasury department uses fx swap to manage their cash? An example would be much appreciated!
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1answer
90 views

Which currency to hedge a position in FX options?

Let's assume a bank sells to a client a put of \$1,000,000 dollars on USDJPY at 110 in 6 months. The delta of this put is -0.6, spot is 112. So to hedge its position the bank has to short \$600,000 ...
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2answers
135 views

FX Correlation Risk from cross ccy pairs

Suppose you are long a TRYJPY call option. And lets say you can delta hedge using USDTRY, AUDJPY, and AUDUSD. In this case I would delta hedge by buying USDTRY, selling AUDJPY, and buying AUDUSD. If ...
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1answer
544 views

Constructing an FX forward curve

A lot of our clients are currently using interest rate parity as a means of constructing an FX forward curve. For instance, to construct the USD-GBP FX Forward curve, they are using the USD LIBOR, ...
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2answers
532 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
233 views

Understanding Forex Positions

I am new to forex trading and using an Oanda free practice account to play with it. However, I'm not understanding a few things. When I buy or sell a currency pair, am I buying/selling a currency or ...
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1answer
267 views

FX Modeling references

I would like to have some sugestions of reference books on FX modeling with strong mathematical approach, preferably combined with market pratictioner quant perspective. All sugesting are welcome! ...
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1answer
164 views

Why is Indian rupee is stable against the USD even though most other currencies weakening?

The Indian Rupee (INR) seems fairly stable against the USD (1 USD = 62-64 INR) in the recent times even though most other currencies have weakened against USD, some by 20-30%. Apparently, INR is ...
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3answers
159 views

What is meant by “position at a given time” in the context of a series of forex trades?

Suppose you are only talking about a single currency pair, say EUR/USD. Throughout some period of time, you engage in trades with various other parties, sometimes buying, sometimes selling. The rates ...
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4answers
389 views

Intermarket analysis - related time series?

I'm about to embark on training a neural network on daily forex data, with a view to obtaining a predictive network. I'm also interested in using data other than the forex currency pair data itself, ...

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