Posts Tagged Derivatives

Practical use of the Delta: Delta neutral management

An FX option position induces a risk, just as a spot or a forward position. A “delta neutral” management consists into fitting an option position with an FX Spot equivalent to compensate changes in risk induced by the option. Example for a seller of a Call FX option: The risk on its position is to get exercised […]

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Introduction to Delta

Delta is one of many indicators that option pricing models are providing (Greeks). It represents the practical level for exercising an option. Consider a call option. During life, before its expiry date: – If the forward price is below the strike price (call out of the money), the option has less than one chance out of two of being […]

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Implied and historical volatility

Volatility is one of the parameters needed to calculate the price of a currency option between its trade date and expiration date. Other parameters provided by the markets are: the spot price of the underlying, interest rates of the two currencies involved. The valuation model used for the European style currency options (vanilla) is Garman-Kohlhagen. […]

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FX Options pricing – Plain Vanilla European model (Part II)

Part II: End of day and online FX options pricing processes Each option contract can have its own pricing method. The implemented model is coded as for all OTC European FX option contracts set in DX.CONTRACT.MASTER:   This “GARMAN.KOHL” code is set in DX.PRICE.SOURCE table with following details:     Description: DX.PR.BUILD.GK is the building […]

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FX Options pricing – Plain Vanilla European model (Part I)

Part I: Description of FX options pricing basic requirements 1.1 Market data feeds To be able to price FX options, the model (Garman & Kohlhagen) needs market data feeds: FX volatilities by currency pairs, risk-free (zero-coupon) interest rates and FX spot rates. Other parameters (strike, time to maturity, etc…) directly come from deal options to revalue. […]

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Interest Rate Options Strategies

Specific strategies for interest rate options Cap and floor Although they are not, strictly speaking, options, caps and floors are usually stored in the same category. These products do indeed play the same role, namely an interest rate cap (cap) or floor (floor). They apply primarily to cash transactions. The above examples are based on […]

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Multivalued fields

Multivalued fields This is a very specific characteristic attached to the RDBMS included with GLOBUS / T24 ( Universe or J-Base?). Surprisingly, this data-type is coming with latests release of Oracle, MS-Access 2007,…Premonitory? It consists into creating multiple occurrences of a field. From a user point of view, it means simply defining and attaching a […]

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DX Overview

The GLOBUS Derivatives product has been developed to allow trading of futures and options. The product supports orders, trading, position keeping, valuation and closing out of both exchange-traded and OTC contracts. The Derivatives product may be used by banks trading on their own behalf, by banks trading on behalf of their customers (including ‘bulk’ trading) […]

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DX Pricing & Prices

Manual prices input External feed of prices (such as Reuters / Telekurs / Bloomberg / etc…): this for all quoted products (ETD Exchange Traded Derivatives). Internal T24 pricing: for non-quoted products, T24 includes different pricing models: Garman Kohlagen for Currency options. Need to feed interest rates in Periodic Interest, currency pairs call/put volatilities in DX.VOLATILITY, […]

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DX concat files

DX Concat Files This chapter briefly describes all useful concat files that may be used either in enquiries or subroutines.  The suffix subr means this concat can only be accessed via a subroutine e.g. there’s no PGM.FILE attached to. List of DX Concat Files DX.CUST.POS DX.TRANS.KEYS DX.TRANS.BALANCES DX.REP.POS.HIST DX.ORD.VERSION.NO DX.ITEM.STATUS DX.RV.LAST.CUST.UPDATE DX.MNEMONIC.CONTRACT Concat for DX […]

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DX Module Setup

How to set -up the DX application. This chapter is not a duplicate of the Temenos user guide, quite well documented but with missing critical parts. It intends to be an add-on, including specific tricks based on my own experience All below information refers to R8.005 release.   FUTURES Setup Check-list Preliminaries Core Commissions Contracts […]

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DX Derivatives overview

This document consists in a quick overview of the Globus Derivatives module (DX). Executive Summary The GLOBUS Derivatives product has been developed to allow trading of futures and options. The product supports orders, trading, position keeping, valuation and closing out of both exchange-traded and OTC contracts. The Derivatives product may be used by banks trading […]

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