MathFinance Seminar: Prof. Dr. Uwe Wystup on Foreign Exchange Exotic Options

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MathFinance Seminar: Prof. Dr. Uwe Wystup on Foreign Exchange Exotic Options

MathFinance Seminar on Foreign Exchange Exotic Options

Prof. Dr. Uwe Wystup

July 14 and 15 2009, 8:30 a.m. - 6:00 p.m.
Lisbon, Portugal

Course Highlight

This practical two-day course covers the pricing, hedging and application of FX exotics for use in trading, risk management, financial engineering and structured products. Presented by Prof. Dr. Uwe Wystup.

THE COURSE

FX exotics are becoming increasingly commonplace in today's capital markets. The objective of this workshop is to develop a solid understanding of the current exotic currency derivatives used in international treasury management. This will give participants the mathematical and practical background necessary to deal with all the products on the market.

PRIOR KNOWLEDGE

Calculus, probability theory, linear algebra, basics of stochastic processes, basic concepts of financial products, programming skills.

WHO SHOULD ATTEND?

Quantitative analysts, traders, risk-managers, financial engineers, structurers, researchers and others who deal with foreign exchange options.

Day I: Review of the Fundamentals of FX Options, Products

Fundamentals

Components of foreign exchange risk: forwards, swaps and vanilla options
FX options market: who does what and why
Software, in particular Reuters Dealing and SuperDerivatives

Vanilla Options

Put-call parity, put-call symmetry, foreign domestic symmetry
Quotation conventions in FX
Dates: trade day, premium payment day, exercise/expiration time, settlement day
Settlement, spreads, deal processing, counterparty risk
Exotic features: deferred payment, contingent payment, deferred delivery, cash-settlement, American and Bermudan exercise rights, cut-offs and fixings
Exercises

Volatility

Implied vs. historic
Quotation in terms of deltas
Volatility cones
Volatility smile: term-structure, skew, risk reversals and butterflies
Volatility sources
Interpolation and extrapolation across the volatility smile surface
Forward volatility
Workshop: Greeks in terms of deltas, hedging volatility risk, deriving the strike from the delta with smile

First Generation Exotics: Products, Pricing and Hedging

Digital options: European and American style, single and double barrier
Barrier options: single and double, knock-in and knock-out
Compound and instalment
Asian options: options on the geometric, arithmetic and harmonic mean
Power, lookback

Structured Products

Dual currency and other FX-linked deposits
Case study: unwinding a DCD
Structured forwards: shark forward, bonus forward, range-reset forward, etc.
FX-linked cross currency swaps
Exotic spot and forward trades
Workshop: structuring exercises

The Traders' Rules of Thumb

How higher order derivatives influence the price
Vanna-volga pricing approach
Case study: one-touch
Discussion of model risk and alternatives: stochastic volatility
Workshop: pricing of barriers with smile

Day II: Second Generation Exotics, Pricing and Hedging issues

Single Currency Exotics

Exotic features in (vanilla) options: deferred payment, contingent payment, deferred delivery, cash-settlement, American and Bermudan exercise rights, cut-offs and fixings
Exotic barrier and touch options
Faders, corridors, accumulative forwards
Forward start options, step-ups
Time options
Variance and Volatility Swaps
Workshop: structuring and pricing of accumulative forwards

Multi Currency Exotics

Product overview with applications: quanto options, baskets, spreads, best-ofs, outside barriers
Correlation: implied correlations, correlation risk and hedging
Pricing in Black-Scholes model: analytic, binomial trees and Monte Carlo
Workshop: pricing and correlation hedging a two-currency best-of

Quantitative Issues

Efficient computation of Greeks using Homogeneity and other Tricks
Efficient computation of Greeks for American Options using Leisen-Reimer Trees
Workshop: Time Options with Leisen-Reimer Trees
Local Volatility model and pricing with the smile using PDEs, application to barrier options
Heston's Stochastic Volatility model, pricing, implementation techniques for analytic and Monte Carlo, applications to exotic options
Pricing with the smile: e.g. weighted Monte Carlo

Course Fees

All prices are net amounts. An extra 20% VAT will be added on the invoice.

	Single	Groups (3 or more, 1 invoice)
Early-bird (registrations on or before 15 June)	EUR 1750	EUR 1500 pp
Regular (registrations from 15 June to 10 July)	EUR 2000	EUR 1750 pp
Academic Participants (registrations on or before 15 June)
Full-time students	EUR 300
Full-time professors	EUR 500
Academic Participants (registrations from 15 June to 10 July)
Full-time students	EUR 500
Full-time professors	EUR 800

We have reserved 10 seats for academic participants on a first-come, first-serve basis. All registrations after that number is reached will be placed on a waiting list and will be informed of availability on the registration deadline.