FX Option Performance

Beschreibung

The FX Option market has grown from humble beginnings in the 1980s to a global behemoth, with hundreds of billions of US dollars worth of flow going through it each trading day. With such size and liquidity, it is generally assumed to be efficient, with few profit opportunities. But astonishingly, this is not so. The authors have taken a completely different attitude to most option studies; instead of looking into the theory of how the products are valued and what they should be worth, they have gone back through the historical data to find out what they actually delivered compared to what they cost. FX Option Performance thus offers a unique and practical guide to option trading and hedging. Written by Jessica James, Jonathan Fullwood and Peter Billington - who among them combine academic rigour with decades of option trading experience - this essential resource has the courage to report how much these contracts have really made or lost. This critical (and often overlooked) information gives investors and hedgers alike the edge they need to make more informed decisions. Written in accessible terms and not overly technical, with over a hundred charts and diagrams to illustrate their findings, this book should appeal to anyone with an interest in the area. The authors reveal where to look for value and offer help to corporations hedging their FX exposures. The results of their studies are presented in extensive and detailed tables, designed so that investors or corporates who have a question on a particular currency pair or type of option can quickly find out what, on average, they have made or lost throughout history. Some of the results they find are truly remarkable, and presented here for the first time. For example, investors who would like to protect against the depreciation of the Brazilian Real would have found FX options to be far cheaper than the apparently simpler forward contracts which are usually assumed to be good value. The options were one third of the cost. Another remarkable discovery is that that longer dated call options pay back on average only about half of their initial cost. It seems astonishing that this information has never before been published. That it has not is a reflection on the mammoth task that the authors undertook when they decided to value options on every currency pair whose data was publicly available, throughout every historical period for which there was good data. Drawing on practical experience of the different data types and valuation methods in the various markets, together with a robust statistical approach, their detailed studies present these results for the first time. FX Option Performance will be a fascinating read for students entering the field, a source of exciting ideas for investors looking for opportunities, and an essential guide for corporations wondering how to hedge their FX exposures.
Get the little known - yet crucial - facts about FX options Daily turnover in FX options is an estimated U.S. $ 207 billion, but many fundamental facts about this huge and liquid market are generally unknown. FX Option Performance provides the information practitioners need to be more effective in the market, with detailed, specific guidance. This book is a unique and practical guide to option trading, with the courage to report how much these contracts have really made or lost. Breaking free from the typical focus on theories and generalities, this book gets specific - travelling back in history to show exactly how options performed in different markets and thereby helping investors and hedgers alike make more informed decisions. Not overly technical, the rigorous approach remains accessible to anyone with an interest in the area, showing investors where to look for value and helping corporations hedge their FX exposures. FX Option Performance begins with a quick and practical introduction to the FX option market, then provides specific advice toward structures, performance, rate fluctuation, and trading strategies. * Examine the historical payoffs to the most popular and liquidly traded options * Learn which options are overvalued and which are undervalued * Discover surprising, generally unpublished facts about emerging markets * Examine systemic option trading strategies to find what works and what doesn't On average, do options result in profit, loss, or breaking even? How can corporations more cost-effectively hedge their exposure to emerging markets? Are cheap out-of-the-money options worth it?

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Jessica James

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