Advanced Currency Options
Duration: 2 days
 Introduction to Currency Options
 Valuation of Currency Options
 Volatility Analysis
 Numerical Procedures and Simulation Methods
 Exotic Currency Options
 Advanced Risk Analysis
 Trading Strategies and Market Arbitrages
 Effective Risk Management Applications
At this advancedlevel course, we shall present and analyse a number of advanced currency option
structures. We start with a general introduction to currency options, and explain how "vanilla" and
"cross rate" options are valued. We then establish analytic pricing formulas (such as the
GarmanKolhagen) as well as numerical procedures (such as the CRR tree) and simulation methods for
valuation of more advanced options. We shall present and analyse a number of "exotic" currency
options such as Asian, lookback, barrier, basket, compound, ladder and rainbow options, in each
explaining how they are priced and hedged, and how the "greeks" are calculated and interpreted.
Further, we present some advanced trading strategies and market arbitrage strategies using these
options. Finally, we shall present and discuss ways of effectively managing the risk of currency
options positions.
Day One
09.00  12.00 Currency Option Basics
 Definitions and Mechanics

Overview of the Currency Options Markets
 Listed options
 OTC markets
 Vanilla Options
 Cross Rate Options
 Applications
Pricing of Currency Options
 Forward FX Rates
 Volatility and Correlation Forecasting
 The GarmanKolhagen Model
 The CRR Model
 Pricing Vanilla and Cross Rate Options

The "Greeks" of Currency Options
 Standard Greeks (delta, gamma, vega,...)
 Advanced Greeks (speed, colour, charm,…)
 Exercises
12.00  13.00 Lunch
13.00  16.30 Exotic Currency Options (I)

Introduction
 What is an Exotic Option?
 Types of Exotic Payoffs
 Applications for Exotic Currency Options
 Modelling Payoffs and Pricing
 Average Rate (Asian) Options
 Barrier Options
 LookBack and LookForward Options
Exotic Currency Options (II)
 EuroDigital Options
 Touch Options
 Contingent Premium Options
 Exercises
Day Two
09.00  12.00 Exotic Currency Options (III)
 Compound Options
 Basket Options
 Leveraged and curvilinear options
 Chooser Options
 Embeddos
 Rainbow Options
 Balloon Options
 Ladder Options
 Quanto Options
Structured Currency Notes
 Dual Currency and Reverse Dual Currency Notes
 Dual Range Notes (EARNS on USD/EUR etc.)
 Index Currency Options Notes
 Principal Protected Currency Notes
 Exercises
12.00  13.00 Lunch
13.00  16.30 Trading Strategies with Currency Options
 The Trading Process
 Exchange Rate Forecasting
 Bull & Bear Strategies
 Cross Currency Spread Trading
 Ratio and Butterfly spread
 Risk Reversals
 Generating Additional Income from Foreign Assets
 Advanced Exotic Trading Strategies
Effective Risk Management with Currency Options
 Using Currency Options in Treasury Risk Management

The Hedging Process
 Calculating FX exposure, choosing the right instrument, calculating the hedge
ratio, implementing and monitoring the hedge
Evaluation and Termination of the Seminar
