Foreign Exchange: A Practical Guide to the FX Markets 1st Edition by Tim Weithers, ISBN-13: 978-0471732037
[PDF eBook eTextbook]
- Publisher: Wiley; 1st edition (August 12, 2013)
- Language: English
- 336 pages
- ISBN-10: 0471732036
- ISBN-13: 978-0471732037
In today’s global marketplace, there is a critical need for both individual and professional investors to become better acquainted with foreign exchange. As economies become more intertwined and currencies continue to fluctuate, we must understand and be able to evaluate the foreign exchange (FX) markets when dealing with a variety of concerns, from consumption decisions and investment portfolios to business and retirement plans.
Throughout his academic and professional financial careers, Tim Weithers has introduced thousands of people to the foreign exchange markets and empowered them to navigate this dynamic environment. Now, in Foreign Exchange: A Practical Guide to the FX Markets, Weithers shares his knowledge, insights, intuition, and many years of experience with you.
Blending theory and practice, this straightforward financial primer takes the technical information commonly associated with today’s FX markets and makes it more accessible. First, you’ll become familiar with some of the basic elements of foreign exchange—major currencies, bid-ask spreads, and the importance of interest rates—as well as gain some historical perspective on the evolution and development of the FX markets. After this introductory overview, you’ll receive a detailed description of the products, techniques, and strategies that can be used to master the foreign exchange markets.
Topics discussed within the following pages include:
- The foreign exchange spot market
- FX forwards and futures
- Cross-currency interest rate swaps
- FX options, structured products, and exotic options
- The economics of exchange rates and international trade
- Currency crises
- Modern developments
- And much more
With this book as your guide, you’ll also gain a solid understanding of how the FX market and its instruments work; acquire an ability to look beyond the noise of news reports and stories presented by the popular media and financial press; and learn how to avoid some of the most common mistakes made in today’s FX markets.
Filled with in-depth insights and helpful recommendations, and backed by numerous examples and exercises, Foreign Exchange frames the FX market in practical economic terms that can help you make sense of this ever-evolving, and often confusing, environment.
Table of Contents:
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.
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