Valuation & Hedging of FX Options
While foreign exchange (FX) options have been available in the financial markets for decades, the valuation and hedging of options can still be somewhat challenging, especially for exotic options.
For vanilla and some semi-exotic options, replicating the option’s payoff via vanilla instruments can simplify pricing and risk calculations. For complex options, however, replication is not always practical. And different pricing models are utilized by market practitioners, but which models best depict volatility smile dynamics for pricing exotic FX options? What if the volatility surface, which is essential for pricing and hedging, is not available?
Join Dr. Ping Sun of Numerix as he provides a primer on the best practices and key issues for practitioners to consider when valuing and hedging FX options.
Dr. Sun covers:
- Introduction to different types of derivatives in the FX market
- Pricing, delta hedging, and replication of FX options
- Volatility smiles and hedging dynamics for different FX pricing models
- How to generate a volatility surface when an FX pair lacks volatility data
- Key takeaways
Featured Speakers
Ping Sun, PhD
Dr. Sun, PhD is Senior Vice President, Financial Engineering at Numerix. He is also product manager of the Numerix CrossAsset analytics platform. During his career at Numerix, Dr. Sun’s work has appeared in number of publications and academic journals, and he has been showcased as a lecturer at a range of academic events and industry conferences. Dr. Sun served as a consultant to Lehman Brothers as a FX / EQ Desk Quant, and his extensive experience includes working to develop the Numerix cross-currency Economic Scenario Generator. He earned a Doctorate Degree in Physics from City College of New York, and a Master’s Degree and Undergraduate Degree in Physics from Fudan University in Shanghai, China.
Greg Murray
Greg Murray is responsible for increasing awareness of the Numerix brand in financial markets around the globe, as well as conducting strategic industry research for different departments within Numerix. Previously, he oversaw product and field marketing initiatives at the company, and he started his tenure in a sales role. Prior to Numerix, Mr. Murray worked in derivative analytics sales roles at other software firms, and he held derivative trading positions for seven years as an option market-maker and proprietary trader across a variety of asset classes.
