FX Exotic Options
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.
Recommend to a Colleague- Date:
- Please contact us
- Venue:
- Cliftons Singapore - The Finexis Building
- Fee:
This course is also available in London Time Zone and New York Time Zone
This course is FTS-Eligible* and also eligible for CPD hours. GARP & CFA Institute members are eligible for CE/CPD credits. See details
- 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.
*FTS Eligible
This programme is approved for listing on the Financial Training Scheme (FTS) Programme Directory and is
eligible for FTS claims subject to all eligibility criteria being met. Please note that in no way does
this represent an endorsement of the quality of the training provider and programme. Participants are
advised to assess the suitability of the programme and its relevance to participants' business activities
or job roles. The FTS is available to eligible entities, at a 50% funding level of programme fees subject
to all eligibility criteria being met. FTS claims may only be made for programmes listed on the FTS Programme
Directory with the specified validity period. Please refer to www.ibf.org.sg for more information.
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 twenty years of financial markets 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 modeling at the University of Antwerp.
Prof Wystup is well known for his many publications on FX exotics and related topics: his 2002 book on Foreign Exchange Risk has become a market standard, including a translation in Mandarin. His second book on FX Options and Structured Products appeared in November of 2006 as part of the Wiley Finance series.
Wiley Finance Published Author.
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
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
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
- Development of Basis Spreads
- Product Range, FX-linked bonds, long-term vanilla and PRDCs
- Modelling approaches
- Discussion of risk features and modelling requirements
It has been a pleasure to attend the course on FX Exotic Option held by Prof Wystup. He gave us a very well described picture of today's FX industry. During the course, he shared his ideas with great enthusiasm and clarity, giving us many examples to work on. One of the best teachers I met in my experience. LFS did a great job organizing this course.
(Quantitative Analyst - Mediobanca S.p.A.)
This 3-day training packs a lot of useful information in a dynamic format. Very cost-effective for an individual or team expanding their FX horizon.
(Senior Director Quant Risk - CME Group)
LFS is an excellent institution with a very high standard of tutors. I have completed two courses through LFS and would highly recommend them.
(Analyst - AMP Capital)
It was a great course delivered by a very knowledgeable professional. Highly recommend it to those in this field to attend.
(Assistant Manager - OCBC Bank)
The course was excellent and exceeded my expectations. I learned a great deal within the 3 days. The lecturer provided the participants with excellent notes, exercises, spreadsheets, his textbook and we have access to the LFS library so that we can build on everything we have learned at the course.[...]
(Quantitative Analyst - Standard Bank Group)
A deep travel in the sneaky FX world, from the theoretical traps to the practical examples. Extremely good professor
(Quantitative Analyst - Mediobanca)
"Professor Uwe Wystup delivered an interesting and market relevant course- he breaks down complex structures into their basic building blocks in order to develop hedging strategies."
(Market Risk - UBS AG)
"One of the best courses I've attended. Uwe has the practical, theoretical knowledge and the skill to teach."
(Director - Nordea)
Great course, relevant and practical
(Treasury Sales - Westpac Banking Corporation)
"FX Exotic Options is a hands-on course covering topics from vanilla FX options and smile construction to replication of exotic payoffs and implications for pricing and hedging. Uwe Wystup is an absolute authority on FX derivatives and presents the course extremely well. Highly recommended."
(Asset Manager - ZZ Vermogensverwaltung)
"I thoroughly enjoyed the 3-day FX Exotic Options course taught by Dr Uwe Wystup. His deep experience in both the theoretical and practical aspects of his field comes in very handy. As a student, you get to learn some very interesting insights on the subject."
(Commercial Banking - Lloyds TSB)
"Course very interactive and packed with lots of theoretical and practical information. A good refresher or a good introduction to the FX options market."
(Risk Manager - Pictet Asset Management )
FX Exotic Options is a hands-on course covering topics from vanilla FX options, smile construction, to replication of exotic payoffs and implications for pricing and hedging. Uwe Wystup is an absolute authority on FX derivatives and presents the course extremely well. Highly recommended.
(Asset Manager - ZZ Vermogensverwaltung)
I thoroughly enjoyed the 3 day FX exotic options course taught by Dr Uwe Wystup. His deep experience in both the theoretical and practical aspects of his field comes in very handy.
(Commercial Banking - Lloyds TSB)
"Very good course and very useful for what we were trying to achieve. The tutor was very helpful at all times and tried to accomodate all levels of knowledge in the group."
(Pricing Manager - investment management)
"A very helpful course to get a deeper understanding of FX Exotic Options. I like most that it was interactive, not only lecture, but exercises and you could always ask questions in between for a better understanding."
(Senior Market Risk Manager - Global Investment Bank)
"Great diverse course content. Uwe Wystup is a fantastic lecturer with a wealth of knowledge that he is fortunately happy to share."
(Manager - Derivatives Trading - )
"If there is only one course you will do on FX Options: just do this one."
(FX Options Trader - Rabobank International)
"Excellent teaching with both theoretical and practical features."
(FX/Money Market - Nordea Bank)
"Great course [...]. Uwe has lots of experience and explains the complex material very clearly."
(Risk Manager - ING Bank)
Course Details
This course is also available in London Time Zone and New York Time Zone
- To run this course at your organisation, contact us.
Call now for more information on this course or to book:
Asia Pacific +65 3159 3707
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London Financial Studies is registered with GARP as an Approved Provider of Continuing Professional Development (CPD) credits.