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4.7 (21 Reviews)

FX Exotic Options

London Financial Studies, In London (+3 locations)
3 days
5,445 USD excl. VAT
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3 days
5,445 USD excl. VAT
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Course description

FX Exotic Options 

"FX Exotic Options" training course is an advanced three-day programme that develops delegates' understanding of complex FX Exotics including pricing, hedging and their multiple applications in trading, financial risk management, financial engineering and structured products.

FX exotics are becoming increasingly commonplace in today’s capital markets.  The objective of this workshop is to develop a solid understanding of the current exotic currency derivatives used in international treasury management. This will give participants the mathematical and practical background necessary to deal with all the products on the market.

All participants will receive a copy of the latest edition of Professor Wystup's reference book "FX Options and Structured Products" , published by Wiley.

Guest speaker (London): Tino Senge - Quantitative Analytics Group, Barclays Capital.

Can't travel? Don't want to travel? LFS Live brings the class to you!

  • Live interactive training from world renowned practitioners in the comfort of your own home
  • Real classroom experience without the inconvenience of travel
  • World class teaching from the comfort of your preferred location

Please contact us for more information.

Upcoming start dates

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  • Classroom
  • New York
  • English

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  • Classroom
  • Singapore
  • English

Uwe Wystup (Course leader)

Professor Uwe Wystup is an extremely experienced practitioner in the field of foreign exchange options, a senior academic and a highly engaging teacher. He has twenty years of financial markets experience as a consultant, financial engineer, trader and structurer at Citibank, UBS, Sal. Oppenheim, Commerzbank and MathFinance and is also honorary Professor of quantitative finance at Frankfurt School of Finance & Management and Professor of financial option price modeling at the University of Antwerp.

Professor Wystup is well known for his many publications on FX exotics and related topics: his 2002 book on Foreign Exchange Risk has become a market standard, including a translation in Mandarin. His second book on FX Options and Structured Products appeared in November of 2006 as part of the Wiley Finance series. 

Suitability - Who should attend?

This "FX Exotic Options " course is suited for all individuals new to FX Exotics and also for those who need to bring their knowledge up to date and learn how the overall FX options market works. However, this is not a basic course on options and understanding of the FX vanilla options market and FX smile is essential to understand exotics.

The programme is also not a pure quantitative modelling seminar, but will provide the necessary mathematics you need to understand to be successful in FX Options.

This course has been designed for individuals involved inthe following areas:

  • Quants/ Financial Engineers: To learn how the products are used
  • Traders: To deepen the technical background
  • Risk Managers: To understand the front-office way of thinking
  • Structurers: To learn more about pricing and models
  • Researchers: To understand the practical matters
  • Sales People: To get the overview of product development and smile adjustments

Training Course Content

Day One

Review of the Fundamentals

  • Components of foreign exchange risk: forwards, swaps and vanilla options
  • FX options market: who does what and why
  • Software solutions: which vendor offers what - Fenics, SuperDerivatives, Bloomberg, Volmaster, Murex, ICY, Reuters

Pricing and Hedging in the Black-Scholes model

  • Black-Scholes / Merton model in FX
  • Derivation of the value of a call and put option
  • Detailed discussion of the formula
  • Greeks: delta, gamma, theta, rho, vega, vanna, volga, homogeneity and relationships among Greeks

Vanilla Options

  • Put-call parity, put-call symmetry, foreign domestic symmetry
  • Quotation conventions in FX, ATM and delta-conventions
  • Dates: trade day, premium payment day, exercise/expiration time, settlement day
  • Settlement, spreads, deal processing, counterparty risk
  • Exotic features: deferred payment, contingent payment, deferred delivery, cash-settlement, American and Bermudan exercise rights, cut-offs and fixings
  • Market Data: rates, forward points, swap points, spreads

Workshop: Acquaint yourself with pricing software and market quotes


  • Implied vs. historic
  • Quotation in terms of deltas
  • Volatility cones
  • Volatility smile: term-structure, skew, risk reversals and butterflies
  • Volatility sources
  • Interpolation and extrapolation across the volatility smile surface: SABR, vanna-volga, Reiswich-Wystup
  • Forward volatility

Workshop: Build your own interpolation tool for volatility smile, calculate Greeks in terms of deltas, hedging volatility risk, deriving the strike from the delta with smile

Structuring with Vanilla Options

  • Risk reversal and participating forward
  • Spreads and seagulls
  • Straddles, strangles, butterflies, condors
  • Digital options

Workshop: Structure your own seagull. Include sales margin. Solve for zero-cost. Calculate delta and vega hedge. Discuss bid-ask spread. Analyze smile effect

Day Two

Structuring and Vanna-Volga-Pricing
First Generation Exotics: Products, Pricing and Hedging

  • Digital options: European and American style, single and double barrier
  • Barrier options: single and double, knock-in and knock-out, KIKOs, exotic barrier options
  • Compound and instalment
  • Asian options: options on the geometric, arithmetic and harmonic mean
  • Power, lookback, chooser, paylater

Workshop: Hedging a knock-out with a risk reversal. Build your own semi-static hedging tool, discuss forward volatility risk

Applications in Structuring

  • Dual currency and other FX-linked deposits
  • Structured forwards: shark forward, bonus forward, range-reset forward
  • FX-linked interest rate swaps and cross currency swaps
  • Exotic spot and forward trades

Workshop: Structuring exercises: build structures, solve for zero cost, smile adjustment, bid-ask spreads

Vanna-Volga Pricing

  • How higher order derivatives influence the price
  • Vanna-volga pricing approach
  • Case study: one-touch, one-touch moustache
  • Discussion of model risk and alternatives: stochastic volatility

Workshop: Pricing of barrier options with smile

Long Term FX Options (contributed usually by the Guest Speaker)

  • Development of Basis Spreads
  • Product Range, FX-linked bonds, long-term vanilla and PRDCs
  • Modelling approaches
  • Discussion of risk features and modelling requirements

Day Three

Second Generation Exotics, Pricing and Hedging issues

Overview of Market Models

  • Stochastic volatility models
  • Heston 93: model properties, calibrations, pricing, pros and cons
  • Local Volatility: properties, pros and cons
  • Stochastic Local Volatility Hybrid models

Super-Replication of barrier options: using leverage constraints and its first order approximation - the barrier shift. Mixing super-replication and vanna-volga

The Pedigree of Barrier and Touch Options

Workshop and Discussion:  How to construct the universe of barrier and touch options from key building blocks: vanilla and one-touch. Residual risk and limitations. Static, semi-static and dynamic hedging approaches

Single Currency Exotics beyond Standard Barrier and Touch Options

  • Exotic features in (vanilla) options: deferred payment, contingent payment, deferred delivery, cash-settlement, American and Bermudan exercise rights, cut-offs and fixings
  • Exotic barrier and touch options
  • Faders, corridors, accumulative forwards, target redemption forwards (TRFs)
  • Forward start options, step-ups
  • Time options
  • Variance and Volatility Swaps

Workshop: Structure and price your own accumulative forward. Smile adjustment. Simulation tool for TRFs. Discussion of TRF hedging

Multi-Currency Exotics

  • Product overview with applications: quanto options, baskets, spreads, best-ofs, outside barriers
  • Correlation: implied correlations, correlation risk and hedging, currency triangles and tetrahedra
  • Pricing in Black-Scholes model: analytic, binomial trees and Monte Carlo

Workshop: Pricing and correlation hedging a two-currency best-of: calculate your own sensitivities and hedge vega and correlation risk

Course delivery details

  • Live interactive training from world renowned practitioners in the comfort of your own home
  • Real classroom experience without the inconvenience of travel
  • World class teaching from the comfort of your preferred location

This course is also available in New York Time Zone and Singapore Time Zone

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Average rating 4.7

Based on 21 reviews.
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Analyst, AMP Capital
11 Nov 2016

LFS is an excellent institution with a very high standard of tutors. I have completed two courses through LFS and would highly recommend them.

Assistant Manager, OCBC Bank
07 Dec 2015

It was a great course delivered by a very knowledgeable professional. Highly recommend it to those in this field to attend.

Quantitative Analyst, Standard Bank Group
02 Dec 2015

The course was excellent and exceeded my expectations. I learned a great deal within the 3 days. The lecturer provided the participants with excellent notes, exercises, spreadsh...

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