FX Exotic Options
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Outstanding institution, with a very high standard of tutors, totally recommended.
← | →
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It was an awesome course conveyed by an exceptionally learned proficient expert. Exceedingly prescribe it to those in this field to attend.
← | →
Short course
In Singapore (Singapore) and London
Get a solid understanding of the current exotic currency derivatives!
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Type
Short course
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Location
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Duration
3 Days
This advanced three day course covers the pricing, hedging and application of FX exotics for use in trading, risk management, financial engineering and structured products.
FX exotics are becoming increasingly commonplace in today’s capital markets. The objective of this workshop is to develop a solid understanding of the current exotic currency derivatives used in international treasury management. This will give participants the mathematical and practical background necessary to deal with all the products on the market.
All participants will receive a copy of the latest edition of Professor Wystup's reference book "FX Options and Structured Products", published by Wiley.
Guest speaker (UK only): Tino Senge - Quantitative Analytics Group, Barclays Capital.
Facilities
Location
Start date
Start date
Start date
About this course
Quants/ Financial Engineers: To learn how the products are used
Traders: To deepen the technical background
Risk Managers: To understand the front-office way of thinking
Structurers: To learn more about pricing and models
Researchers: To understand the practical matters
Sales People: To get the overview of product development and smile adjustments
This course is for anyone new to FX Exotics and those who need to bring their knowledge up to date and learn how the overall FX options market works. However, this is not a basic course on options and understanding of the FX vanilla options market and FX smile is essential to understand exotics.
The programme is also not a pure quantitative modelling seminar, but will provide the necessary mathematics you need to understand to be successful in FX Options.
Reviews
-
Outstanding institution, with a very high standard of tutors, totally recommended.
← | →
-
It was an awesome course conveyed by an exceptionally learned proficient expert. Exceedingly prescribe it to those in this field to attend.
← | →
Course rating
Recommended
Centre rating
Annonymous
Anonymous
This centre's achievements
All courses are up to date
The average rating is higher than 3.7
More than 50 reviews in the last 12 months
This centre has featured on Emagister for 16 years
Subjects
- Options
- Risk
- IT risk
- Market
- Swaps
- Derivatives
- FX Exotic
- Financial Engineering
- Vanilla
- Volatility
- Bloomberg
- Volmaster
- Murex
- ICY
- Reuters
Teachers and trainers (1)
Uwe Wystup
Teacher
Professor Uwe Wystup is an extremely experienced practitioner in the field of foreign exchange options, a senior academic and a highly engaging teacher. He has over twenty years of experience as a consultant, financial engineer, trader and structurer at Citibank, UBS, Sal. Oppenheim, Commerzbank and MathFinance and is also honorary Professor of quantitative finance at Frankfurt School of Finance & Management and Professor of financial option price modelling at the University of Antwerp. Prof Wystup is well known for his many publications on FX exotics and related topics.
Course programme
Day One
Review of the Fundamentals
Fundamentals
- Components of foreign exchange risk: forwards, swaps and vanilla options
- FX options market: who does what and why
- Software solutions: which vendor offers what Fenics, SuperDerivatives, Bloomberg, Volmaster, Murex, ICY, Reuters
Pricing and Hedging in the Black Scholes model
- Black Scholes / Merton model in FX
- Derivation of the value of a call and put option
- Detailed discussion of the formula
- Greeks: delta, gamma, theta, rho, vega, vanna, volga, homogeneity and relationships among Greeks
Vanilla Options
- Put call parity, put call symmetry, foreign domestic symmetry
- Quotation conventions in FX, ATM and delta conventions
- Dates: trade day, premium payment day, exercise/expiration time, settlement day
- Settlement, spreads, deal processing, counterparty risk
- Exotic features: deferred payment, contingent payment, deferred delivery, cash settlement, American and Bermudan exercise rights, cut offs and fixings
- Market Data: rates, forward points, swap points, spreads
Workshop: Acquaint yourself with pricing software and market quotes
Volatility
- Implied vs. historic
- Quotation in terms of deltas
- Volatility cones
- Volatility smile: term structure, skew, risk reversals and butterflies
- Volatility sources
- Interpolation and extrapolation across the volatility smile surface: SABR, vanna volga, Reiswich Wystup
- Forward volatility
Workshop: Build your own interpolation tool for volatility smile, calculate Greeks in terms of deltas, hedging volatility risk, deriving the strike from the delta with smile
Structuring with Vanilla Options
- Risk reversal and participating forward
- Spreads and seagulls
- Straddles, strangles, butterflies, condors
- Digital options
Workshop: Structure your own seagull. Include sales margin. Solve for zero cost. Calculate delta and vega hedge. Discuss bid ask spread. Analyze smile effect
Day Two
Structuring and Vanna Volga Pricing
First Generation Exotics: Products, Pricing and Hedging
- Digital options: European and American style, single and double barrier
- Barrier options: single and double, knock in and knock out, KIKOs, exotic barrier options
- Compound and instalment
- Asian options: options on the geometric, arithmetic and harmonic mean
- Power, lookback, chooser, paylater
Workshop: Hedging a knock out with a risk reversal. Build your own semi static hedging tool, discuss forward volatility risk
Applications in Structuring
- Dual currency and other FX linked deposits
- Structured forwards: shark forward, bonus forward, range reset forward
- FX linked interest rate swaps and cross currency swaps
- Exotic spot and forward trades
Workshop: Structuring exercises: build structures, solve for zero cost, smile adjustment, bid ask spreads
Vanna Volga Pricing
- How higher order derivatives influence the price
- Vanna volga pricing approach
- Case study: one touch, one touch moustache
- Discussion of model risk and alternatives: stochastic volatility
Workshop: Pricing of barrier options with smile
Overview of Market Models
- Stochastic volatility models
- Heston 93: model properties, calibrations, pricing, pros and cons
- Local Volatility: properties, pros and cons
- Stochastic Local Volatility Hybrid models
Super Replication of barrier options: using leverage constraints and its first order approximation the barrier shift. Mixing super replication and vanna volga
Day Three
Second Generation Exotics, Pricing and Hedging issues
The Pedigree of Barrier and Touch Options
Workshop and Discussion: How to construct the universe of barrier and touch options from key building blocks: vanilla and one touch. Residual risk and limitations. Static, semi static and dynamic hedging approaches
Single Currency Exotics beyond Standard Barrier and Touch Options
- Exotic features in (vanilla) options: deferred payment, contingent payment, deferred delivery, cash settlement, American and Bermudan exercise rights, cut offs and fixings
- Exotic barrier and touch options
- Faders, corridors, accumulative forwards, target redemption forwards (TRFs)
- Forward start options, step ups
- Time options
- Variance and Volatility Swaps
Workshop: Structure and price your own accumulative forward. Smile adjustment. Simulation tool for TRFs. Discussion of TRF hedging
Multi Currency Exotics
- Product overview with applications: quanto options, baskets, spreads, best ofs, outside barriers
- Correlation: implied correlations, correlation risk and hedging, currency triangles and tetrahedra
- Pricing in Black Scholes model: analytic, binomial trees and Monte Carlo
Workshop: Pricing and correlation hedging a two currency best of: calculate your own sensitivities and hedge vega and correlation risk
Long Term FX Options (contributed usually by the Guest Speaker)
- Development of Basis Spreads
- Product Range, FX linked bonds, long term vanilla and PRDCs
- Modelling approaches
- Discussion of risk features and modelling requirements
FX Exotic Options