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.
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
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