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Foreign Exchange Options and Risk Management - Product Image

Foreign Exchange Options and Risk Management

  • ID: 4804081
  • Book
  • June 2018
  • Risk Books
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The foreign exchange (FX) markets are experiencing a time of great change brought about by unprecedented levels of transparency and efficiency in the aftermath of the Global Financial Crises of the 2000s.

Industry experts Demetri Papacostas and Francesco Tonin use their extensive experience and knowledge to examine the behaviour of the FX markets' major players during this critical period.

Fintech and the global coordination of regulation is allowing, for the first time, a look under the hood. The FX market will look increasingly like the equity market, and the rocky path to the promised land of frictionless, fully transparent FX markets will be closer than ever.

Foreign Exchange Options and Risk Management examines the basic use of FX, and particularly FX options, by the major market participants, and assesses in a practical and intuitive way:

  • How they mitigate risk
  • Why they mitigate risk
  • How they profit and how they speculate using FX-related instruments.

Taking a real-world approach the authors keep to minimally quantitative and easily digested chapters. Addressing topics from a range of perspectives and revisited multiple times.

The book is split into three parts:

  • Part 1 looks at the forces shaping the FX market today; the changing character of FX trading; who the key players are; who is trading what; forecasting FX and understanding its strengths and limitations.
  • Part 2 offers more context. The authors provide a practical explanation of the FX spot and forward markets. Papacostas and Tonin then give the reader a panoptical view of how options work, analysing the contribution of different FX players and examining how they cope with more FX risk. Basic FX option structures are also discussed, looking at what they can tell us about the market, as well as pointing out the shortcomings inherent in the models and how they are being misused.
  • Part 3 focuses in on those players in the market that are not in it to maximise profit, and consequently have attracted a constellation of participants trying to extract that value. The authors also examine the sources of inefficiency within the markets namely the involvement of corporate and asset managers.
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Demetri Papacostas is head of the Market Specialist Group at Bloomberg. His FX career spans 35 years, with extensive experience developing and running profitable FX and derivative businesses for major financial institutions. His FX derivative product specialisation includes trading, structuring and selling to corporations, hedge funds and asset managers, as well as to the private wealth arms of money centre banks. Prior to Bloomberg, Demetri was a managing director at JPMorgan, where he ran the commercial bank FX sales team in New York and FX derivatives sales nationally, and he previously also managed its currency derivative structuring team. He also established a global FX derivative sales presence for ABN AMRO, and previously managed currency and precious metal options business for Royal Bank of Canada, Security Pacific (Bank of America), UBS and Marine Midland Bank.

Demetri is a well-known speaker at financial forums and webinars, has been quoted in the Wall Street JournalProfit & Loss magazine and Bloomberg Business Summit 2014, CFO Edition, and has been published in Bloomberg’s Markets and appeared on Bloomberg TV to discuss the FX markets. He received a BA in economics and computer science from New York University, and an MBA from Pace University, with numerous honours and distinctions for academic achievement.

Francesco Tonin is an FX market specialist at Bloomberg, based in New York. Most recently, he was the North America head of FX structuring at Citigroup, having been recruited initially at Morgan Stanley for a sales position in interest rates derivatives. Francesco then worked at Deutsche Bank in FX corporate sales, and subsequently in FX exotic derivatives trading, and at Credit Suisse held an FX structuring role. He has presented together with corporate speakers such as General Motors, Fluor Corporation, Dell Computers, Knowles Corporation, including to the national Association for Financial Professional conference, Texpo, Windy City, Minnesota AFP, New York Cash Exchange, the IMF, Princeton University and Columbia University. Francesco has written a couple of hundred articles on financial matters, with contributions to Bloomberg Markets magazine and Bloomberg Briefs.

His mathematical research activity focused on the Cauchy problem for partial differential equations with holomorphic coefficients, for which he received research grants from the EU, the French Ministère des Affaires Etrangères, the University of Padova and the University of Pisa, in addition to the Italian National Research Council and a Fulbright Scholarship offer. Francesco holds a BS in mathematics from the University of Padova, a PhD in mathematics from the University of Torino and an MBA from Columbia University, and has also held a tenured research position at the University of Padova.

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