Preface.
Acknowledgments.
CHAPTER 1: Trading Money.
Introduction.
Trading Money.
The Roles Money Plays.
The Major Currencies.
Some Interesting Questions.
Appendix: Countries, Currencies, and ISO Codes.
CHAPTER 2: Markets, Prices, and Marketmaking.
What Is a “Market”?
What Is a “Price”?
Buyers and Sellers.
Marketmaking.
Summary.
CHAPTER 3: Interest Rates.
What Are “Interest Rates”?
Inflation.
Day Count or Day Basis.
Compounding.
Discounting.
Types of Interest Rates.
Interest Rates in the Real World.
CHAPTER 4: Brief History of Foreign Exchange.
Historical Background.
The FX Markets Today.
The Regulatory Environment and Central Bank Intervention.
Summary.
CHAPTER 5: The Foreign Exchange Spot Market.
The Spot Market.
Spot FX Quoting Conventions.
Economic Interpretation.
Purchasing Power Parity.
Cross Rates and Triangular Arbitrage in the Spot Market.
The Bid–Ask Spread in Foreign Exchange.
Timing.
Settlement.
Market Jargon.
“The Best Arbitrage Around!”
CHAPTER 6: Foreign Exchange Forwards.
Introduction to Forwards and Forward Pricing.
Foreign Exchange Forwards and Forward Pricing.
Interest Rate Parity (Covered Interest Arbitrage).
FX Spot–Forward Arbitrage.
FX Forward Price Quotes and Forward Points.
Timing.
Off-Market Forwards.
Foreign Exchange Forwards in the Real World.
CHAPTER 7: Foreign Exchange Futures.
Background.
Futures versus Forwards.
Foreign Exchange Futures Contract Specifications.
Margin.
Why Use Futures?
Options on FX Futures.
Summary.
CHAPTER 8: Foreign Exchange Swaps or Cross-Currency Swaps or Cross-Currency Interest Rate Swaps or . . . .
Introduction.
FX Spot-Forward Swaps.
Cross-Currency Swaps or FX Cross-Currency Interest Rate Swaps or FX Bond Swaps.
Summary.
CHAPTER 9: Foreign Exchange Options.
Option Basics.
Equity Options.
Put-Call Parity with Equity Options.
In-the-Money, At-the-Money, and Out-of-the-Money.
Theoretical Option Value and Option Risk Measures (“The Greeks”).
Foreign Exchange Options.
Put-Call Parity in Foreign Exchange.
Perspective Matters.
FX Option Premium.
Volatility.
Uses and Strategies.
Appendix: Theoretical Option Valuation.
The Binomial Model.
The Black–Scholes/Garman–Kohlhagen Model.
The Garman–Kohlhagen Option Risk Measures or “Greeks”.
CHAPTER 10: Exotic Options and Structured Products.
What Is an Exotic Option?
Nonstandard Options.
Digital or Binary Options.
Barrier Options.
Other Exotic Options.
FX-Linked Notes.
CHAPTER 11: The Economics of Exchange Rates and International Trade.
Money versus Currency.
Types of FX Exposures.
Fixed versus Floating Exchange Rates.
Implications of Monetary Policy.
Trade Deficits: A Curse or a Blessing.
Politics and Economics.
CHAPTER 12: Currency Crises.
The End of Bretton Woods.
Bankhaus Herstatt.
The ERM Crisis of 1992.
The Asian Crisis of 1997.
The Russian Crisis of 1998.
The Turkish Lira Crisis of 2001.
The Argentinean Peso Crisis of 2002.
Summary.
CHAPTER 13: Technical Analysis.
Introduction.
What Is Technical Analysis?
Methods of Technical Analysis.
Technical Analysis in Foreign Exchange.
Technical Analysis Today.
Summary.
CHAPTER 14: Where Do We Go From Here?
CHAPTER 15: Conclusion.
APPENDIX.
Precious Metals.
Answers to the Chapter Exercises.
Notes.
References.
About the Author.
Index.
TIM WEITHERS, PhD, was one of the members of the Education Department of the O'Connor Partnership, a legendary proprietary option trading firm, which is now part of UBS. As a Managing Director of Financial Markets Education for UBS, he teaches thousands of clients and employees every year through seminars and internal classes, and serves as a faculty member of the Graduate Program on Financial Mathematics at The University of Chicago.
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