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Foreign Exchange Exotic Options by Professor Uwe Wystup
This practical two-day course covers the pricing, hedging and application of FX exotics for use in trading, risk management, financial engineering and structured products. Presented by
Professor Uwe Wystup
Guest Speaker: FX Hybrids Modelling:
Claudio Albanese
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.
Prior Knowledge:
Calculus, probability theory, linear algebra, basics of stochastic processes, basic concepts of financial products, programming skills.
Who Should Attend?:
Quantitative analysts, traders, risk-managers, financial engineers, structurers, researchers and others who create or deal with foreign exchange.
Important Note:
Delegates are required to bring their own laptops with internet (Wi-Fi) access to work on case studies and live exercises using SuperDerivatives.
All delegates will receive a complimentary copy of the Wiley 2006 publication: FX Options and Structured Products by Uwe Wystup
Topics covered: | Day 1: Review of the Fundamentals of FX Options | Day 2: Second Generation Exotics Pricing and Hedging issues & FX Hybrids Modelling | Details: | download pdf
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Day 1: Review of the Fundamentals of FX Options | |
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Fundamentals
- Components of foreign exchange risk: forwards, swaps and vanilla options
- FX options market: who does what and why
- Software, in particular Reuters Dealing and SuperDerivatives
Vanilla Options
- Put-call parity, put-call symmetry, foreign domestic symmetry
- Quotation conventions in FX
- 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
- Exercises
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
- Forward volatility
- Workshop: Greeks in terms of deltas, hedging volatility risk, deriving the strike from the delta with smile
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
- Compound and instalment
- Asian options: options on the geometric, arithmetic and harmonic mean
- Power, lookback
Structured Products
- Dual currency and other FX-linked deposits
- Case study: unwinding a DCD
- Structured forwards: shark forward, bonus forward, range-reset forward, etc.
- FX-linked cross currency swaps
- Exotic spot and forward trades
- Workshop: structuring exercises
The Traders' Rules of Thumb
- How higher order derivatives influence the price
- Vanna-volga pricing approach
- Case study: one-touch
- Discussion of model risk and alternatives: stochastic volatility
- Workshop: pricing of barriers with smile
Day schedule: 09:00 – 17:30
Break: 10:30 – 10:45
Lunch: 12:30 – 13:30
Break: 15:15 – 15:30
Topics covered: | Day 1: Review of the Fundamentals of FX Options | Day 2: Second Generation Exotics Pricing and Hedging issues & FX Hybrids Modelling | Details: | download pdf
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Day 2: Second Generation Exotics Pricing and Hedging issues & FX Hybrids Modelling | |
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Single Currency Exotics
- 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
- Forward start options, step-ups
- Time options
- Variance and Volatility Swaps
- Workshop: structuring and pricing of accumulative forwards
Multi Currency Exotics
- Product overview with applications: quanto options, baskets, spreads, best-ofs, outside barriers
- Correlation: implied correlations, correlation risk and hedging
- Pricing in Black-Scholes model: analytic, binomial trees and Monte Carlo
- Workshop: pricing and correlation hedging a two-currency best-of
Quantitative Issues
- Efficient computation of Greeks using Homogeneity and other Tricks
- Efficient computation of Greeks for American Options using Leisen-Reimer Trees
- Workshop: Time Options with Leisen-Reimer Trees
- Local Volatility model and pricing with the smile using PDEs, application to barrier options
- Heston's Stochastic Volatility model, pricing, implementation techniques for analytic and Monte Carlo, applications to exotic options
- Pricing with the smile: e.g. weighted Monte Carlo
FX Hybrids Modelling: Presenter: Claudio Albanese
- Examples of typical products
- Power Reverse Dual Currency knock outs and cancellables
- FX inverse floaters
- FX TARNs
- Quantoed structures
- History of FX model for long dated structures
- Cross-Currency Libor Market Models
- Semi-parametric Models and Operator Methods
- Trends in System Engineering: clusters and GPU computing
- Stochastic monetary policy models
- Modelling the long-dated FX smile
- Modeling correlations by dynamic conditioning
Day schedule: 09:00 – 17:30
Break: 10:30 – 10:45
Lunch: 12:30 – 13:30
Break: 15:15 – 15:30
Topics covered: | Day 1: Review of the Fundamentals of FX Options | Day 2: Second Generation Exotics Pricing and Hedging issues & FX Hybrids Modelling | Details: | download pdf
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Details: | |
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Location:
The Millennium Hotel London Knightsbridge
17 Sloane Street
London SW1X 9NU
Hotel Website
Nearest Tube: Knightsbridge
Flight details:
All delegates flying into London on the morning of the event are reminded that they should arrive 30 minutes before the workshop starts for registration. The hotels West End location is approximately 1 hour from all 3 main London airports, Heathrow, Gatwick and City. Returning flights should equally allow for the events finishing time.
Complimentary inbound transfer service:
WBS Training now extend our premium service to all our clients. This includes a complimentary inbound transfer from London airports to central London hotels for all workshops. If you require this service simply inform us up to 2 working days prior to your arrival (flight number, arrival time, airport and hotel destination) and we will arrange a complimentary pick up. You will be given a phone number to call on arrival and will be greeted at the airport by our partner taxi company.
Sponsorship:
World Business strategies Ltd, offer sponsorship opportunities for all events, E-mail headers and the web site. Contact Sponsorship: +44 (0) 1273 674400
Disclaimer:
World business strategies command the rights to cancel or alter any part of this programme.
Cancellation:
By completing of this form the client hereby enters into a agreement stating that if a cancellation is made by fax or writing within two weeks of the event date no refund shall be given. However in certain circumstances a credit note maybe issued for future events.
Prior to the two week deadline, cancellations are subject to a fee of 25% of the overall course cost.
Topics covered: | Day 1: Review of the Fundamentals of FX Options | Day 2: Second Generation Exotics Pricing and Hedging issues & FX Hybrids Modelling | Details: | download pdf