Value Vanilla FX Options
- directly, as a Strike Value
- as a ratio of Strike to the Forward Rate
- as a Delta Target. In that latter case, the pricer will seek the Strike that corresponds to the specified Delta Target
- as the "At-The-Money" Strike: either the "At-The-Money-Forward" or the "Zero-Delta Straddle" Strike
The input page layout is as follows: The inputs are: *Currency Pair*: a drop-down list allowing the user to select the currency pair of the option*Payoff Type*: a drop-down list allowing the user to select either a Call or a Put option*Maturity*: a drop-down list allowing to user to select either:a predetermined maturity, ranging from one week to one year a user-input actual exercise date
*Exercise Date*: an input box for the user to input the date in the day, month, year format, only to be used if the selected maturity is "Actual Exercise Date"*Moneyness Type*: a drop-down list allowing the user to select either:*Actual Strike*, i.e., an actual value for the option's exercise price*Ratio of the Strike to the Forward Rate*, i.e., the ratio of the option' strike to the*Forward FX Rate**Left-Hand-Side Delta*(protects option value in the*underlying*currency). The pricer will automatically adjust the Strike so that the option's Left-Hand-Side Delta be equal to the specified target*Right-Hand-Side Delta*(protects option value in the*numéraire*currency). The pricer will automatically adjust the Strike so that the option's Right-Hand-Side Delta be equal to the specified target
*Exercise Price or Delta*: an input box for the user to enter either the desired Strike or the Delta target, depending on the selected Moneyness Type. If no input is provided, then the pricer selects the*At-The-Money Strike*: either the*Forward Rate*(if*Moneyness Type*is not Delta) or the*Zero-Delta Straddle Strike*(if*Moneyness Type*is Delta)
Pricing
is achieved by clicking on the “
The pricing output is as follows. Revalued at Market Close as of: Thu 13 Oct 2011 ## USDJPY CALL
## Premium and Greeks
The
“ *Value*(or*Premium*): this is the present value of the option, i.e., the premium that the dealer asks her client to pay to buy the option^{1}*Delta*: this is the sensitivity (first derivative) of the option's value (with respect) to the Spot FX Rate:*Left-Hand-Side Delta*(LHS) denotes when the option's value is expressed in the*underlying*currency, for example the USD in a USDJPY Call^{2}*Right-Hand-Side Delta*(RHS) denotes when the option's value is expressed in the*numéraire*currency, for example the JPY in a USDJPY Call
*Gamma*: this is the sensitivity of the Delta to the Spot FX Rate*Vega*: this is the sensitivity of the option's value to the Volatility of the FX Rate*Theta*: this is the sensitivity of the option's value to the passage of time, otherwise known as the*Time Decay**Vanna*: this is the sensitivity of the vega to the Spot FX Rate*Volga*: this is the sensitivity of the Vega to the volatility of the FX Rate
All
results are given per unit of This
is the option The
For the Wikipedia explanation of Vanilla FX Options along with a Case Study, please Click Here __________________________________________________ 1 Commercial margin considerations left aside 2 As the option's value is expressed in the numéraire, the Left-Hand-Side Delta corresponds to the first derivative of the option value divided by the Spot FX rate with respect to the Spot FX Rate. It is different from the Right-Hand-Side Delta, i.e., the first derivative of the the option value with respect to the Spot FX Rate. 3 i.e., the right, not the obligation (c) Reference Derivatives 2011 |