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Foreign Exchange Option Pricing: A Practitioner's Guide by Iain J. Clark

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Chapter 1

Introduction

This book covers foreign exchange (FX) options from the point of view of a practitioner in the area. With content developed with input from industry professionals and with examples using real-world data, this book introduces many of the more commonly requested products from FX options trading desks, together with the models that capture the risk characteristics necessary to price these products accurately, an area often neglected in the literature, which is nevertheless of paramount importance in the real financial marketplace. Essentially this is a mathematical practitioner’s cookbook that contains all the information necessary to price both vanilla and exotic FX options in a professional context.

Connecting mathematically rigorous theory with practice, and inspired by the questions asked daily by junior quantitative analysts (quants) and other colleagues (both from FX and other asset classes) this book is aimed at quants, quant developers, traders, structurers and anyone who works with them. Basically, this is the book I wish I’d had when I started in the industry. This book will also be of real benefit to academics, students of mathematical finance across all asset classes and anyone wishing to enter this area of finance.

The level of knowledge assumed is about at the level of Hull (1997) and Baxter and Rennie (1996) – both excellent introductory works. This work extends that knowledge base specifically into FX and I hope will be useful to those joining ...

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