Description

Define the mechanics of an FX option, the differences in the way FX option prices are quoted, and the wholesale market trading conventions. Understand the common approach to pricing in the FX option market and look at the risk measures used.

Learning Objectives

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1. Recall the mechanics of FX options and their wholesale market trading conventions.
2. Identify the specific features of vanilla FX calls and puts.
3. Identify various ways to quote the premium and different methods to structure option payouts.
4. Recall the function of typical volatility smiles.
5. Recall how FX option Greeks are expressed.
6. Evaluate the applications of FX option-specific pricing and mechanics.
7. Analyze the risk measures of FX options in financial markets.