An essential guide to real-world derivatives trading

FX Derivatives Trader School is the definitive guide to the technical and practical knowledge required for successful foreign exchange derivatives trading. Accessible in style and comprehensive in coverage, the book guides the reader through both basic and advanced derivative pricing and risk management topics.

The basics of financial markets and trading are covered, plus practical derivatives mathematics is introduced with reference to real-world trading and risk management. Derivative contracts are covered in detail from a trader's perspective using risk profiles and pricing under different derivative models. Analysis is approached generically to enable new products to be understood by breaking the risk into fundamental building blocks. To assist with learning, the book also contains Excel practicals which will deepen understanding and help build useful skills.

The book covers of a wide variety of topics, including:

• Derivative exposures within risk management
• Volatility surface construction
• Implied volatility and correlation risk
• Practical tips for students on trading internships and junior traders

• Market analysis techniques

  FX derivatives trading requires mathematical aptitude, risk management skill, and the ability to work quickly and accurately under pressure. There is a tremendous gap between option pricing formulas and the knowledge required to be a successful derivatives trader. FX Derivatives Trader School is unique in bridging that gap.

  Autorentext

  GILES JEWITT is the Head of FXO Automated Trading and eRisk for HSBC in London. He has worked on trading desks in London and Hong Kong for over a decade, pricing and risk managing the full range of FX Derivatives products.

  Klappentext

  An essential guide to real-world derivatives trading FX Derivatives Trader School is the definitive guide to the technical and practical knowledge required for successful foreign exchange derivatives trading. Accessible in style and comprehensive in coverage, the book guides the reader through both basic and advanced derivative pricing and risk management topics. The basics of financial markets and trading are covered, plus practical derivatives mathematics is introduced with reference to real-world trading and risk management. Derivative contracts are covered in detail from a trader's perspective using risk profiles and pricing under different derivative models. Analysis is approached generically to enable new products to be understood by breaking the risk into fundamental building blocks. To assist with learning, the book also contains Excel practicals which will deepen understanding and help build useful skills. The book covers of a wide variety of topics, including: Derivative exposures within risk management Volatility surface construction Implied volatility and correlation risk Practical tips for students on trading internships and junior traders * Market analysis techniques FX derivatives trading requires mathematical aptitude, risk management skill, and the ability to work quickly and accurately under pressure. There is a tremendous gap between option pricing formulas and the knowledge required to be a successful derivatives trader. FX Derivatives Trader School is unique in bridging that gap.

  Inhalt

  Preface xi

  Acknowledgments xiii

  Part I The Basics 1

  Chapter 1 Introduction to Foreign Exchange 3

  Chapter 2 Introduction to FX Derivatives 11

  Chapter 3 Introduction to Trading 19

  Practical A Building a Trading Simulator in Excel 27

  Chapter 4 FX Derivatives Market Structure 39

  Chapter 5 The Black-Scholes Framework 57

  Practical B Building a Numerical Integration Option Pricer in Excel 69

  Chapter 6 Vanilla FX Derivatives Greeks 77

  Practical C Building a Black-Scholes Option Pricer in Excel 91

  Chapter 7 Vanilla FX Derivatives Pricing 103

  Chapter 8 Vanilla FX Derivatives Structures 121

  Chapter 9 Vanilla FX Derivatives Risk Management 137

  Chapter 10 Vanilla FX Derivatives Miscellaneous Topics 159

  Practical D Generating Tenor Dates in Excel 165

  Part II The Volatility Surface 169

  Chapter 11 ATM Curve Construction 171

  Practical E Constructing an ATM Curve in Excel 193

  Chapter 12 Volatility Smile Market Instruments and Exposures 205

  Practical F Constructing a Volatility Smile in Excel 233

  Chapter 13 Probability Density Functions 241

  Practical G Generating a Probability Density Function from Option Prices in Excel 253

  Part III Vanilla FX Derivatives Trading 261

  Chapter 14 Vanilla FX Derivatives Trading Exposures 263

  Chapter 15 Vanilla FX Derivatives Trading Topics 293

  Chapter 16 ATM Volatility and Correlation 313

  Chapter 17 FX Derivatives Market Analysis 323

  Part IV Exotic FX Derivatives 355

  Chapter 18 Exotic FX Derivatives Pricing 357

  Chapter 19 FX Derivatives Pricing Models 375

  Chapter 20 Exotic FX Derivatives Product Classification 387

  Chapter 21 European Digital Options 399

  Chapter 22 European Barrier Options 413

  Chapter 23 Touch Options 423

  Chapter 24 American Barrier Options 439

  Chapter 25 Exotic FX Derivatives Trading Topics 461

  Chapter 26 Window Barrier and Discrete Barrier Options 473

  Practical H Building a Monte Carlo Option Pricer in Excel 485

  Chapter 27 Vanilla Variations 497

  Chapter 28 Accrual and Target Redemption Options 515

  Chapter 29 Asian Options 527

  Chapter 30 Multi-Asset Options 539

  Chapter 31 Miscellaneous Options 555

  Further Reading 573

  About the Companion Website 575

  Index 577