Benoit Fleury Director, Algorithmics Bloomberg Solutions with contributionsfrom David Syer and Andrew Aziz
Benoit Fleury Director, Algorithmics Bloomberg Solutions with contributionsfrom David Syer and Andrew Aziz

STP for forex – pre trade market risk analysis in e-forex platforms

Monitoring currency exposure requires a sophisticated risk engine stresses Benoit Fleury. He illustrates how the latest risk management products can not only support complex derivative products but can now also be embedded within electronic platforms

First Published: e-Forex Magazine 10 / Features / April, 2003

Pre-trade market risk analysis in e-forex platforms In a world where currency traders, portfolio managers and corporate treasurers are pursuing ever more sophisticated investment strategies, it is becoming increasingly difficult to properly assess the true risk profile of certain positions. This is especially true in the forex trading market where complex products such as path-dependent barrier options are used to establish direction trades or when the underlying currency exposure arises from a position in multifaceted products such as structured notes or convertible bonds.Investors historically have analyzed their currency exposure in isolation and under simplistic assumptions with respect to the timing and magnitude of the expected cash flows they are trying to hedge. As a result, hedging currency exposure usually entailed assessing “par value” or “nominal” currency exposure and subsequently hedging the portion deemed unacceptable using plain-vanilla currency options or...continued

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