T2W Trading Community

Description

In recent years, currencies of major industrial nations have fluctuated widely in response to trade imbalances, interest rates, commodity prices, and political uncertainty. The pressure to maintain currency parity has led to the breakdown of many exchange rate mechanisms, and has forced the need for active foreign exchange hedging decisions to prevent the erosion of profit margins. To counteract this worldwide market volatility, currency options were developed as an alternative risk management tool to the spot and forward foreign exchange market, and owe their existence to the demands of foreign exchange users for alternative hedging and exposure management techniques.

This essentially practical book gives a thorough and comprehensive guide to currency options, with clear explanations of the technicalities. It should become recommended reading for many business courses, and will be of interest to new recruits and junior members in investment and merchant banks; to Forex specialist firms; to Treasury institutions; and to investors who require a quick guide within a trading and sales environment.

From the Author
Introduces the novice to the practical skills necessary to understand the curreny options market. It gives a clear understanding of how this market functions, offering a practical guide to all the main vanilla and exotic products of the currency options market, to the techniques used and to jargon used in everyday dealings.

This primer sets out to give a clear understanding of how the market functions, giving practical guidance to all the main products, techniques used, and to the every day jargon used by market participants, especially when it comes to pricing options. The key features are the examples, diagrams, glossaries, clear explanation of the technicalities which are an essential part of the market and the everyday language in which it has been written. This comprehensive study is for anyone involved or wanting to become involved in the currency options market.

The whole purpose of the primer has been to keep each chapter concise, while still explaining all the essential and necessary components and concepts needed to fully understand the everyday workings of this particular sector of the financial markets.

Chapter Headings

Disclaimer

1. Introduction

PART I. MARKET OVERVIEW

2. The Foreign Exchange Market
3. A Brief History of the Market
4. Market Overview
5. Major Participation
6. Roles Played
7. Purposes
8. Applications of Currency Options

PART II. CURRENCY OPTIONS - THE ESSENTIALS

10. Definitions and Terminology
11. The Currency Option Concept
12. The Currency Options Market
13. Option Pricing Theories
14. The Greeks
15. Payoff and Profit/Loss Diagrams
16. Basic Properties of Options
17. Risk Reversals
18. Market Conventions

PART III. CURRENCY OPTION PRODUCTS

19. Vanilla Options
20. Common Option Strategies
21. Exotic Options
22. Structures Currency Options
23. Case Studies
24. Option Hedge Matrix
25. Concluding Remarks

Index