Effects of Currency on Portfolio Risk and Return
Domestic currency or home currency is the currency of the investor (or the currency in which portfolio results are reported and analyzed). Domestic …
level III
FX Concepts
The Price and Base Currencies: The base currency is the denominator of the exchange rate and it is priced in terms of the numerator. Bid/Asked …
Derivatives on Volatility
With the introduction of volatility futures and variance swaps, many investors now consider volatility an asset class in itself. In …
Managing Equity Risk
Investors can achieve or modify their equity risk exposures using equity swaps and equity forwards and futures. Equity Swaps An …
Managing Currency Exposure
Currency swaps, forwards, and futures can be used to effectively alter currency risk exposures. Currency risk is the risk that …
Managing Interest Rate Risk
An interest rate swap is an over-the-counter (OTC) contract between two parties that agree to exchange cash flows on specified …
Managing Risk Exposures
There are many ways in which investment managers and investors can use swaps, forwards, futures, and volatility derivatives. The typical …
Volatility Skew and Smile
In practice, if implied volatility is computed for actual traded options on a particular underlying (e.g. a stock) the option …
Option Greeks
Delta (Δ) is the change in an option’s price in response to a change in price of the underlying, all else equal. …