Chapter 24
FX Options and Volatility Derivatives: An Overview from the Buy-Side Perspective
This chapter is an overview of foreign exchange (FX) options and derivatives products. It can be used as a starting point for those who would like to develop some intuition in FX volatility market either for hedging or for searching for opportunities. This chapter is split into four parts. The first part presents the motivation behind FX options and discusses the need for options from the first principles. The second part gives an overview of the options market and the role of market makers. The third part discusses FX volatility as an asset class concept and gives some insights into Black Swan strategies. The fourth part discusses opportunities in the FX volatility market and finishes with the discussion on hedging of illiquid assets.
FX optionsn volatility derivativesn Black Swan fundsn JEL Classification: F31.
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