Advanced Currency Options
Duration: 2 days
- Introduction to Currency Options
- Valuation of Currency Options
- Volatility Analysis
- Numerical Procedures and Simulation Methods
- Exotic Currency Options
- Advanced Risk Analysis
- Trading Strategies and Market Arbitrages
- Effective Risk Management Applications
At this advanced-level course, we shall present and analyse a number of advanced currency option
structures. We start with a general introduction to currency options, and explain how "vanilla" and
"cross rate" options are valued. We then establish analytic pricing formulas (such as the
Garman-Kolhagen) as well as numerical procedures (such as the CRR tree) and simulation methods for
valuation of more advanced options. We shall present and analyse a number of "exotic" currency
options such as Asian, lookback, barrier, basket, compound, ladder and rainbow options, in each
explaining how they are priced and hedged, and how the "greeks" are calculated and interpreted.
Further, we present some advanced trading strategies and market arbitrage strategies using these
options. Finally, we shall present and discuss ways of effectively managing the risk of currency
options positions.
Day One
09.00 - 12.00 Currency Option Basics
- Definitions and Mechanics
-
Overview of the Currency Options Markets
- Listed options
- OTC markets
- Vanilla Options
- Cross Rate Options
- Applications
Pricing of Currency Options
- Forward FX Rates
- Volatility and Correlation Forecasting
- The Garman-Kolhagen Model
- The CRR Model
- Pricing Vanilla and Cross Rate Options
-
The "Greeks" of Currency Options
- Standard Greeks (delta, gamma, vega,...)
- Advanced Greeks (speed, colour, charm,…)
- Exercises
12.00 - 13.00 Lunch
13.00 - 16.30 Exotic Currency Options (I)
-
Introduction
- What is an Exotic Option?
- Types of Exotic Pay-offs
- Applications for Exotic Currency Options
- Modelling Pay-offs and Pricing
- Average Rate (Asian) Options
- Barrier Options
- Look-Back and Look-Forward Options
Exotic Currency Options (II)
- Euro-Digital Options
- Touch Options
- Contingent Premium Options
- Exercises
Day Two
09.00 - 12.00 Exotic Currency Options (III)
- Compound Options
- Basket Options
- Leveraged and curvi-linear options
- Chooser Options
- Embeddos
- Rainbow Options
- Balloon Options
- Ladder Options
- Quanto Options
Structured Currency Notes
- Dual Currency and Reverse Dual Currency Notes
- Dual Range Notes (EARNS on USD/EUR etc.)
- Index Currency Options Notes
- Principal Protected Currency Notes
- Exercises
12.00 - 13.00 Lunch
13.00 - 16.30 Trading Strategies with Currency Options
- The Trading Process
- Exchange Rate Forecasting
- Bull & Bear Strategies
- Cross Currency Spread Trading
- Ratio and Butterfly spread
- Risk Reversals
- Generating Additional Income from Foreign Assets
- Advanced Exotic Trading Strategies
Effective Risk Management with Currency Options
- Using Currency Options in Treasury Risk Management
-
The Hedging Process
- Calculating FX exposure, choosing the right instrument, calculating the hedge
ratio, implementing and monitoring the hedge
Evaluation and Termination of the Seminar
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