Technical paper/Foreign exchange
Evolutionary algos for optimising MVA
Alexei Kondratyev and George Giorgidze apply two evolutionary algos to MVA optimisation
Local variance gamma revisited
In this paper, the authors propose a new method of constructing volatility surfaces for foreign exchange options.
A review of the fundamentals of the Fundamental Review of the Trading Book: standard foreign exchange rules are highly asymmetric with respect to reporting currencies
This paper develops a framework to fully characterize the invariance of the Delta capital charge for the FX book under a change in reporting currency.
Value-at-risk estimation with the Carr–Geman–Madan–Yor process: an empirical study on foreign exchange rates
This paper investigates the performance of the CGMY distribution in estimating the risk of FX rates.
Stochastic receding horizon control for short-term risk management in foreign exchange
The authors of this paper formalize a methodology to manage short-term FX risk.
Banks’ expected equity-to-asset ratio bounds under foreign exchange risk
This paper develops optimal bounds of the expectation equity-to-asset ratio.
Cutting edge: Incorporating forex volatility into commodity spread option pricing
Spread option pricing: importance of forex risk factors illustrated
Smile transformation for price prediction
Prediction of arbitrage-free option prices that outperform existing models
Local correlation families
Local correlation families
Cooking with collateral
Cooking with collateral
Quanto adjustments in the presence of stochastic volatility
It is well known that the quanto adjustment in the drift of the underlying has a significant impact on the prices of quanto options. Alexander Giese points out that an additional quanto adjustment in the underlying’s volatility needs to be considered in…
An easy-to-hedge covariance swap
An easy-to-hedge covariance swap
Quanto adjustments in the presence of stochastic volatility
Quanto adjustments in the presence of stochastic volatility
Repricing the cross smile: an analytic joint density
Repricing the cross smile: an analytic joint density
Repricing the cross smile: an analytic joint density
Repricing the cross smile: an analytic joint density
Choice of collateral currency
Collateral agreements are becoming popular in the over-the-counter derivatives market. Masaaki Fujii and Akihiko Takahashi demonstrate its significant impact on derivatives pricing with a direct link to the cross-currency market. The importance of…
Choice of collateral currency
Choice of collateral currency
Estimating intrinsic currency values
Forex market practitioners constantly talk about the strengthening or weakening of individual currencies. In this article, Jian Chen and Paul Doust present a new methodology to quantify these statements in a manner that is consistent with forex market…
The intrinsic currency-valuation framework
Cutting Edge: Foreign exchange
The vanna-volga method for implied volatilities
Cutting Edge - Option pricing
The intrinsic currency valuation framework
Introducing the concept of the intrinsic value of a currency, Paul Doust shows how to use foreign exchange market volatilities to calculate the volatilities of intrinsic currency values and the correlations between them
The vanna-volga method for implied volatilities
Option pricing
Calculating transfer risk using Monte Carlo
Marco van der Burgt constructs a model of emerging market transfer risk based on a country’s foreign exchange reserves that is combined with facility-dependent risk factors that determine counterparty exposure in the event of a moratorium. He then…