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Foreign exchange derivatives – exotic options

by Neil Schofield

Languages: English

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About the trainer:

Neil Schofield is the principal of FMT Ltd., a UK-based company offering training services in the areas of treasury, derivatives, capital markets and risk management to financial institutions, central banks and corporations worldwide.

Neil was global head of Financial Markets training at Barclays Capital from 2001 to 2008. He teaches primarily on the rates business, covering all of the major asset classes and their respective derivative products from foreign exchange through to commodities.

Before joining Barclays Capital, he was a director at Chisholm-Roth Training for 4 years, where he was responsible for the provision of training services for a number of blue chip global investment banks. Clients included Citigroup, Deutsche Bank, Goldman Sachs, and JP Morgan Chase.

He started his training career at Chase Manhattan Bank, where he was originally employed as an internal auditor. Over a period of nine years, he conducted numerous internal and external training seminars including the Bank of England and the Federal Reserve System in the USA.

He has also held positions with Security Pacific Hoare Govett (now trading as Bank of America) and Lloyds TSB.

Neil holds a B.Sc. in Economics from Loughborough University and an MBA from Manchester Business School. He was elected as a Fellow of the IFS School of Finance (formerly the Chartered Institute of Bankers) in 1999.

Neil was appointed as a Visiting Fellow at the University of Reading ICMA center in April 2007.

He is the author of the book Commodity Derivatives: Markets and Applications and Trading the Fixed Income, Inflation and Credit Markets both published by Wiley.

He is currently writing two books a co-authored book entitled “Trading inflation: markets, instruments and strategies” and a sole-authored book “Equity derivatives: corporate and institutional and applications”.

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Foreign exchange derivatives – exotic options by Neil Schofield

About the training

#Barrier options   #Binary options   #Path-dependent options   #Correlation-dependent options

The course as outlined here does presume an understanding of option fundamentals and ideally valuation and risk management. It is possible to design a bespoke course that can include any content required by the client. The first part of the course covers so-called ‘path-dependent’ instruments and starts by looking at the features of barrier options, the principles of how they are valued and then some examples of how they are applied. A similar approach is then taken for binary options. The second part of the course looks at correlation within an FX perspective. This segment initially describes the nature of FX correlation before considering how this metric could be traded. The course can be expanded to include other FX-related topics such as: Volatility and variance swaps Forward volatility agreements Accrual and target redemption structures Asian options Compound options

Learning outcomes

Barriers and Binaries

Describe the main characteristics of path-dependent options such as barriers and binaries

Path-dependent valuation

Outline the main principles of path-dependent valuation and how the option Greeks vary relative to a vanilla equivalent. Outline some typical applications of path-dependent options

Currency pairs

Define and calculate the implied correlation between two currency pairs

FX option structures

Describe a variety of correlation-dependent FX option structures

Program

  • What are barrier options?

  • Risk management solutions that use barrier options

  • Principles of barrier valuation

  • Characteristics of binary options

  • Binary option applications

  • Understanding FX correlation: Best of / worst of options; Dual digital options; Basket options

Main benefits

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  • #Fast and cheap
  • #Highest level of proficiency