ACF Academy
Derivatives Training Training
 Derivatives Training
Targeted Audience:
 Anyone working in FX or currency sales and trading, or those advising clients on managing their FX risk.
 A good working knowledge of the FX spot and forward markets.
CPE Credits:
 14 hours
Course Level:
Date  DurationCostVenueRegister
30-31 Jul 2018  2 days£1925.00London
15-16 Aug 2018  2 days£1925.00London
23-24 Aug 2018  2 days$2750.00New York
3-4 Sep 2018  2 days$2750.00New York

Foreign Exchange Options

This is an intensive hands-on seminar taking delegates from the essentials of options through to exotics, showing the practical use of options, as well as the risk management of an options book by the bank.

The principal objectives of this intensive two-day seminar are to:
Give delegates a clear understanding of the behaviour and characteristics of options, and how options differ from other financial products like forwards.
Explore the practical use of exotic, non-standard, and second generation options.
Demonstrate how vanilla and exotic options can be combined to build targeted hedges, or to exploit specific views of the market.
Reconcile the risk-reduction needs of clients buying option products with the risk-management needs of banks selling option products.
Demonstrate the principles used in the active hedging of derivative instruments and portfolios, and the practical problems faced by traders in managing a book of options.
Develop within delegates an innovative and pro-active approach to the handling of their own or their clients' FX risk management needs.
Consolidate delegates’ understanding by providing extensive first-hand experience with computer-based strategy evaluation, graphics, analytics, option pricing, and simulation.
Hot Topic  FX options in a volatile environment.

After attending the program, delegates will have mastered the concepts and practices of FX options, be confident in handling products ranging from vanilla options to exotics, and will return able to make an immediate and effective contribution to the management and control of currency risk through the use of FX options.

Course Outline
 Principles and Characteristics of FX Options
FX option trading conventions
An intuitive insight into option pricing
FX options pricing workshop
FX options: American vs. European style
Call-put parity
Significance of volatility
Historic, implied, experienced volatility
Volatility smiles and skews
Measures of option price sensitivity – delta, theta, vega, gamma
“Greeks” workshop
Quoting FX options using volatility
Risk reversals
Implications from risk reversal prices
 Building Option Portfolios
Horizontal, vertical, and diagonal spreads
Straddles and strangles
Ratio spreads and backspreads
Designing your own structure – a fluent transition between payoff diagrams and component parts
 Hedging and Financial Engineering with FX Options
Comparison of using in-, at- and out-of-the-money options
True cost of options hedging – time value
Hedging techniques using short option positions
Creating and using collars or risk reversals
Creating and using spreads
Zero-premium hedges
Creating and using zero-cost collars
Creating and using participating forwards
Deferred and embedded premiums
Creating and using break-forwards
The “continuum” from in-the-money to out-of-the-money options
Hedging FX risk
Financial Engineering with Currency Options
 Option Trading Strategies
Directional vs. volatility trading
Directional trading strategies
Near vs. far dates
Out-of-the-money vs. in-the-money
Options vs. cash
Volatility trading strategies
Directional and volatility trading with currency options
 Delta Hedging – Theory and Practice
Exactly how delta-hedging works
Why be delta-neutral?
Buying high and selling low to achieve delta-neutrality
The link between delta and gamma
The cost of being negative gamma
The benefit of being positive theta
The link between gamma and theta
The trade-off between implied volatility and experienced volatility
The link between theta and vega
“Easy” and “difficult” options to hedge
Gamma hedging
Transactions costs
How often do we re-hedge?
Market gapping problems
P&L risks while running an options book
The cost of hedging and running an options book
Delta-hedging simulation
 Overview of Exotic FX Options
Introduction to exotic options
Path-dependent options
Options with step-like (singular) payouts
Correlation products
Other exotics: compound and forward-start
 Barrier Options
Up, down, knock-in, and knock-out – variations on a theme
Barriers with rebates
Normal and partial (window) barriers
Single, double, and multiple barriers
Outside barriers
Curvilinear barriers
Practical issues in monitoring the barrier
Practical applications for barrier options in hedging financial risk
Barrier Option Pricing Workshop
Using FX barrier options
Risk characteristics of barrier options
 Digital Options and the “Digital Cookbook”
One-touch, all-or-nothing – variations on a theme
Cash-or-nothing and asset-or-nothing
Digital options as a basic building block
Creating a pay-later option
Creating a reverse contingent option
Creating a “money back” option
Creating a stepped-premium option
Creating enhanced-rate synthetic forwards
Digital Options Pricing Exercises
Using Pay Later Options
Risk characteristics of digitals
 Putting it All Together
Review of structures, barriers, and digitals
Combining exotics with vanilla options
Embedding options within a package
Designing innovative solutions
Reducing the cost of client hedges
Exotic options structuring exercise


NB All practical sessions are highlighted like this:
means a Workshop or Simulation
means a Case study


"Overall excellent – best training course I have ever taken."

– Nikhil M.