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18 votes
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If the volatility of pounds/euros = .2 do we know anything about the volatility of euros/pounds?

The trick here is that you're not asking about $\mathrm{Var}\left(\frac1X\right)$. Imagine one currency is a stock $S$ and the other a stock $Q$. Then the volatility of the exchange is the square root ...
jeremy909's user avatar
  • 333
10 votes
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FX forward with stochastic interest rates pricing

The formula $F^X(t,T) = E_t^d\left(X_T \right)$, under the domestic risk-neutral measure, is problematic. Note that, at time $t$, the forward exchange rate $F^X(t,T)$, for maturity $T$, is the ...
Gordon's user avatar
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10 votes

Is this how stock trading works?

In January 2020, Matteo Aquilina, Eric Budish, and Peter O’Neill from Britain's Financial Conduct Authority published this study, illustrating how "low latency" market participants can make ...
Dimitri Vulis's user avatar
10 votes
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How to Bloomberg compute the implied Yield ? What is FX swap basis spread?

1 ) The value 1.062732 is the Forward outright as quoted on FRD. Your pricing source is BGN (Bloomberg Generic New York). That ...
AKdemy's user avatar
  • 9,024
9 votes
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Why do FX Swaps have Interest Rate Risk?

An FX Swap can be described as "borrowing in one currency and lending in another". When put this way it is clear that it has something to do with interest rates in the two currencies. You will be very ...
Alex C's user avatar
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9 votes
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Inflation effect on FX rates

Edit: adding some references (main body is untouched) Kenneth Rogoff and Richard Meese received an incredulous reaction to their now-famous paper showing that random-walk (RW) forecasts outperform ...
AKdemy's user avatar
  • 9,024
8 votes

FX Option pricing on Forward vs. Spot

As long as you price on the outright forward and not on forward points (which is how most forwards are quoted in the market), this is essentially the same coin, looked at from different sides. If you ...
AKdemy's user avatar
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8 votes
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Pricing of a Foreign Exchange Vanilla Option

Be careful of your rate conventions! The issue here is that all your rates are expected to be in units of domestic vs 1 unit of foreign. So for example USDCAD is 1.3347, you really need to be using 1/...
msitt's user avatar
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8 votes

Where can someone get free (or very cheap) high frequency tick forex data?

Dukascopy offers historical tick data. Through their historical data website you can download what you want, but registration is required, and lots of manual clicking. However if you are comfortable ...
Tony's user avatar
  • 181
8 votes

When to Choose FX Swap or Forward

An FX swap exposes the user to a risk that is intrinsic to the interest rate differentials and supply and demand factors of one currency relative to another, but fundamentally there is negligible ...
Attack68's user avatar
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8 votes
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Spot/Next and Tom/Next FX forward swaps

Let’s say the settlement period is T+2, and you made a deal on the 8/10/2018. The spot date would be 10/10/2018 (assuming no holidays!), that’s when the physical exchange would happen. Now if you don’...
Magic is in the chain's user avatar
8 votes

Is this how stock trading works?

You would definitely have some advantage. High Frequency Trading is all about speed and the fastest traders wins. Oftentimes, winner takes all. The blog Sniper in Mahwah & friends digs into the ...
Bob Jansen's user avatar
  • 8,562
8 votes
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Quantlib: day-by-day evaluation of option value

There are two different time gaps in OVML: time to expiry = Expiry Date - Price Date time to delivery = Delivery Date - Premium Date You can see the premium date at the bottom of the OVML screen. ...
AKdemy's user avatar
  • 9,024
8 votes
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Dynamics of FX rate

I am answering now instead of commenting. The rate of change in FX is naturally forward looking in this case. What you confuse is what happened to Spot due to changes in interest rate environments ...
AKdemy's user avatar
  • 9,024
7 votes

How do I get a good mid-price?

Ask minus bid has nothing to do with the mid price - it is the spread. Generally you see a collection of bid/offer orders resting on different price levels. In the simplest case, you just see one bid ...
Chris Taylor's user avatar
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7 votes
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Calculate strike from Black Scholes delta

This is a little more complicated than the answer provided above since this is FX and the convention for determining the strike matters. https://www.researchgate.net/publication/...
FinanceGuyThatCantCode's user avatar
7 votes
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EUR/CHF fx rate drop on the 15th of January 2015

What happened was totally unexpected end of peg against the euro @ 1.2CHF regime that Swiss central bank aborted. See some articles about it. As far as I know nobody in the markets knew, there was no ...
Jan Sila's user avatar
  • 732
7 votes
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Understanding the GDAX price chart

The top chart is called a 'candle stick chart' or 'OHLC candlestick' or 'OHLC bar chart' http://multicharts.com/trading-charts When the price goes down during a time interval (from O to C) the box is ...
nbbo2's user avatar
  • 11.5k
7 votes
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FX Option with Different Premium Currency

Let $X_t^{gbp\rightarrow usd}$ and $X_t^{chf\rightarrow usd}$ be the respective exchanges rates from one unit of GBP and CHF to units of USD. Depending on the option contractual specification, the ...
Gordon's user avatar
  • 21.2k
7 votes
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Strike / delta relationship for FX options

In FX world, the ATM strike is the delta-neutral strike, that is, the absolute delta values of a call and the corresponding put are the same. Moreover, the delta can be premium adjusted or not ...
Gordon's user avatar
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7 votes
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Converting time bars to tick bars or volume bars in python

As mentioned in my comment, tick data is the individual quotes and trades; Yahoo only has daily data. As an analogy, you can always make a high-definition photo more blurry and pixelated, but you can'...
chrisaycock's user avatar
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6 votes
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Pricing foreign currency bonds - which approach is more theoretically "sound"?

In #2, you can use FX forwards to convert your JPY cashflows to USD but it is more common in practice to use a cross-currency swap for this purpose. Indeed, the advantage of the latter is that it ...
Marcino's user avatar
  • 507
6 votes
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FX Option Pricing Under Basis Adjustment

If the forward fx price is available, it already includes any basis adjustment and you may use the Black model (in a GBM world) to value the option. In that case the only usage of the interest rate ...
dm63's user avatar
  • 17.2k
6 votes

Pricing of a Foreign Exchange Vanilla Option

The answer given is mostly wrong: @msitt uses a convoluted way without explicitly mentioning it (put-call symmetry) to actually give the price of a USD Put, not of a USD Call as requested. Here is a ...
jherek's user avatar
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6 votes
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Does Yahoo/Google no longer support web-scraping of FOREX data?

Yahoo has changed their site structure. The new download URLs look like this: https://query1.finance.yahoo.com/v7/finance/download/MSFT?period1=1463461200&period2=1494910800&interval=1d&...
Brian from QuantRocket's user avatar
6 votes

Which data sources are available for cryptocurrencies?

As mentioned in other answers, Coinmarketcap and Bitcoincharts are two options. The data they provide is also available from Quandl too. The only issue is, that data has daily frequency and is only ...
Tanmay's user avatar
  • 261
6 votes
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What is the formula for calculating fair value of currency futures?

$$F = Spot \times e^{(\text{local interest rate} - \text{foreign interest rate}) \times T}$$ where $Spot$ = AUD per dollars. $T$ is the time to maturity of the contract (in years). So for example ...
Patriots299's user avatar
6 votes
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Group name for currencies, equities and other financial products

The most universal name that any "currency (pair)", "equities" or "futures" falls under is either a product or an instrument. In some ways I prefer product because you can have 2 exchanges allowing ...
madilyn's user avatar
  • 5,240
6 votes

Pricing an fx option in the same currency

Let $P^d$ and $P^f$ denote the respective USD and EUR risk-neutral measures. We assume that, under the USD risk-neutral measure, \begin{align*} dS_t = S_t \Big(\big(r^d-r^f \big)dt +\sigma dW_t \Big), ...
Gordon's user avatar
  • 21.2k
6 votes

Relation between ATM, RR and BF

The ATM is an outright position (long 50 delta put and 50 delta call) so the main exposure is vega. It is the riskiest of the three, and demands a higher bid-offer spread from market makers to ...
Chris Taylor's user avatar
  • 5,931

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