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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.
List of contents
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 DerivativesMiscellaneous 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 DerivativesMarket 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 CompanionWebsite 575
Index 577
About the author
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.
Summary
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.
