{"product_id":"foreign-exchange-operations-isbn-9780470932919","title":"Foreign Exchange Operations","description":"\u003cb\u003eThe ultimate nuts-and-bolts guide to foreign exchange operations\u003c\/b\u003e  \u003cp\u003eThe foreign exchange landscape is particularly risky since so much of the world is unregulated and takes place over the counter (off exchange). Brilliant traders and money managers who are profitable may find themselves underperforming, or worse, losing, simply because they failed to establish strong operations. In this book, David DeRosa provides industry players with everything they need for strong operational functions from all the types of trades to execution, master trading agreements, documentation, settlement, margin and collateral, and prime brokerage services.\u003c\/p\u003e \u003cul\u003e \u003cli\u003eContains vital work flow solutions for trading in the volatile foreign exchange marketplace\u003c\/li\u003e \u003cli\u003eOffers information for mastering the operational aspect of foreign exchange trading to help determine best partners such as prime brokers and others\u003c\/li\u003e \u003cli\u003eWritten by David DeRosa a leading foreign exchange expert who has consulted to hundreds of financial institutions\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003e\u003ci\u003eForeign Exchange Operations\u003c\/i\u003e helps traders mitigate risks and offers a guide to all aspects of trading operations from mastering trading agreements to margin documentation.\u003c\/p\u003e  \u003cp\u003ePreface xi\u003c\/p\u003e \u003cp\u003eAcknowledgments xv\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 1 Introduction to Foreign Exchange 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eDefining Money 1\u003c\/p\u003e \u003cp\u003eParticipants in the Foreign Exchange Market 2\u003c\/p\u003e \u003cp\u003eIdentifying Currencies and Exchange Rates 4\u003c\/p\u003e \u003cp\u003eQuotation Conventions 5\u003c\/p\u003e \u003cp\u003eThe Foreign Exchange Market 6\u003c\/p\u003e \u003cp\u003eForeign Exchange Regimes 11\u003c\/p\u003e \u003cp\u003eExchange Rate Controls 12\u003c\/p\u003e \u003cp\u003eThe Structure of the Foreign Exchange Market 12\u003c\/p\u003e \u003cp\u003eBanks’ Identification Codes 13\u003c\/p\u003e \u003cp\u003eThe Authorities 15\u003c\/p\u003e \u003cp\u003eSpot Foreign Exchange Deals 17\u003c\/p\u003e \u003cp\u003eProfit and Loss on a Simple Trade 18\u003c\/p\u003e \u003cp\u003eValue Dates 19\u003c\/p\u003e \u003cp\u003eForward Foreign Exchange and Covered Interest Parity 20\u003c\/p\u003e \u003cp\u003eForward Swaps 21\u003c\/p\u003e \u003cp\u003eNon-Deliverable Forwards 22\u003c\/p\u003e \u003cp\u003eSummary 22\u003c\/p\u003e \u003cp\u003eAppendix 1.1: ISO Currency Codes 23\u003c\/p\u003e \u003cp\u003eReferences 34\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 2 Options on Foreign Exchange 35\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eOption Basics 35\u003c\/p\u003e \u003cp\u003ePut–Call Parity 37\u003c\/p\u003e \u003cp\u003eThe Importance of Option Models 39\u003c\/p\u003e \u003cp\u003eRisk Parameters 41\u003c\/p\u003e \u003cp\u003eThe Minor Greeks 44\u003c\/p\u003e \u003cp\u003eMore on Delta 45\u003c\/p\u003e \u003cp\u003ePortfolios of Options 50\u003c\/p\u003e \u003cp\u003eAmerican Exercise Models 51\u003c\/p\u003e \u003cp\u003eVolatility 52\u003c\/p\u003e \u003cp\u003eImportant Option Strategies 55\u003c\/p\u003e \u003cp\u003eOption Market Making 56\u003c\/p\u003e \u003cp\u003eNon-Deliverable Options 56\u003c\/p\u003e \u003cp\u003eBarrier Options 58\u003c\/p\u003e \u003cp\u003eBinary Options 65\u003c\/p\u003e \u003cp\u003eBarrier Determination Agency 69\u003c\/p\u003e \u003cp\u003eOther Exotic Options 70\u003c\/p\u003e \u003cp\u003eMore on Option-Related Risks 70\u003c\/p\u003e \u003cp\u003eSummary 72\u003c\/p\u003e \u003cp\u003eAppendix 2.1: Further Comments on Put–Call Parity 72\u003c\/p\u003e \u003cp\u003eAppendix 2.2: Black-Scholes-Merton Model 74\u003c\/p\u003e \u003cp\u003eAppendix 2.3: Barrier and Binary Options 75\u003c\/p\u003e \u003cp\u003eReferences 78\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 3 How Trades are Executed and Confirmed 81\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eSpot Foreign Exchange Deals 83\u003c\/p\u003e \u003cp\u003eForward Outright Deals 83\u003c\/p\u003e \u003cp\u003eForward Swap Deals 85\u003c\/p\u003e \u003cp\u003eOption Trades 87\u003c\/p\u003e \u003cp\u003eHow Foreign Exchange Trades are Executed 88\u003c\/p\u003e \u003cp\u003eConcentration in Market Making 89\u003c\/p\u003e \u003cp\u003eExample of an Electronic Trading Platform: FXall 92\u003c\/p\u003e \u003cp\u003eTrade Documentation Cycle 97\u003c\/p\u003e \u003cp\u003eInternal Operations and Reports for Dealers 141\u003c\/p\u003e \u003cp\u003eSummary 159\u003c\/p\u003e \u003cp\u003eAppendix 3.1: Transactions at Daily Fixings 160\u003c\/p\u003e \u003cp\u003eReferences 160\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 4 Foreign Exchange Settlement 161\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eSettlement Instructions for an Individual Spot Foreign Exchange Deal 161\u003c\/p\u003e \u003cp\u003eOverview of the Settlement Process 170\u003c\/p\u003e \u003cp\u003eThe Bretton Woods-Smithsonian Period 171\u003c\/p\u003e \u003cp\u003eThe Herstatt Legacy 172\u003c\/p\u003e \u003cp\u003eSettlement Risk 173\u003c\/p\u003e \u003cp\u003eNetting 176\u003c\/p\u003e \u003cp\u003eHow the Modern Settlement Systems Developed 181\u003c\/p\u003e \u003cp\u003eLarge-Value Transfers 186\u003c\/p\u003e \u003cp\u003eCentral Bank Involvement 186\u003c\/p\u003e \u003cp\u003eCorrespondent Banking 187\u003c\/p\u003e \u003cp\u003ePayment Systems 187\u003c\/p\u003e \u003cp\u003eDesignated-Time Net Settlement (DTNS) 189\u003c\/p\u003e \u003cp\u003eReal-Time Gross Settlement (RTGS) 189\u003c\/p\u003e \u003cp\u003eExamples of Modern Payment Systems 192\u003c\/p\u003e \u003cp\u003eCLS Bank International 203\u003c\/p\u003e \u003cp\u003eInternal Controls 208\u003c\/p\u003e \u003cp\u003eSummary 209\u003c\/p\u003e \u003cp\u003eReferences 209\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 5 Master Agreements 211\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eMotivation 212\u003c\/p\u003e \u003cp\u003eThe Architecture 214\u003c\/p\u003e \u003cp\u003eThe FXC Master Agreement Forms 215\u003c\/p\u003e \u003cp\u003eThe ISDA Master Agreement Forms 215\u003c\/p\u003e \u003cp\u003eSingle Agreement 217\u003c\/p\u003e \u003cp\u003eNon-Reliance: Parties to Rely on Their Own Expertise 219\u003c\/p\u003e \u003cp\u003eNetting: Payment or Settlement Netting and Novation Netting 220\u003c\/p\u003e \u003cp\u003eEvents of Default 221\u003c\/p\u003e \u003cp\u003eTermination Events 228\u003c\/p\u003e \u003cp\u003eAdditional Termination Events 230\u003c\/p\u003e \u003cp\u003eClose-Out Netting 231\u003c\/p\u003e \u003cp\u003eSafe Harbors 232\u003c\/p\u003e \u003cp\u003eEarly Termination 233\u003c\/p\u003e \u003cp\u003ePayments Upon Termination and Close-Out Amounts 234\u003c\/p\u003e \u003cp\u003eClose-Out Amount: 2002 ISDA 236\u003c\/p\u003e \u003cp\u003eSet-Off Provisions 241\u003c\/p\u003e \u003cp\u003eSpecial Features for Options: ICOM and FEOMA 241\u003c\/p\u003e \u003cp\u003eSpecial Features for Non-Deliverable Forwards 242\u003c\/p\u003e \u003cp\u003eMiscellaneous Issues 242\u003c\/p\u003e \u003cp\u003eMore on Deeds of Adherence and Schedules 245\u003c\/p\u003e \u003cp\u003eSummary 245\u003c\/p\u003e \u003cp\u003eAppendix 5.1: IFXCO Terms 246\u003c\/p\u003e \u003cp\u003eAppendix 5.2: IFXCO Adherence Agreement 275\u003c\/p\u003e \u003cp\u003eReferences 281\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 6 Margin and Collateral 283\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCredit Agreements 283\u003c\/p\u003e \u003cp\u003eFramework for the ISDA Credit Support Deed and the FXC Collateral Annex 285\u003c\/p\u003e \u003cp\u003eFramework for the ISDA Credit Support Annexes 293\u003c\/p\u003e \u003cp\u003eEnforcement Rights of the Secured Party 294\u003c\/p\u003e \u003cp\u003eSome Additional Features Commonly Found in Credit Support Documents 296\u003c\/p\u003e \u003cp\u003eThe Value-at-Risk Concept 297\u003c\/p\u003e \u003cp\u003eVaR for Spot, Forward, and Vanilla Options 298\u003c\/p\u003e \u003cp\u003ePortfolio Value-at-Risk 305\u003c\/p\u003e \u003cp\u003eSample Customer Credit Snapshot 310\u003c\/p\u003e \u003cp\u003eLimitations of VaR 310\u003c\/p\u003e \u003cp\u003eLimitations of Collateralized Agreements 313\u003c\/p\u003e \u003cp\u003eSummary 313\u003c\/p\u003e \u003cp\u003eAppendix 6.1: The 1999 Collateral Annex to FEOMA, IFEMA, or ICOM Master Agreement 314\u003c\/p\u003e \u003cp\u003eReferences 337\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 7 Foreign Exchange Prime Brokerage 339\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eOverview of FX Prime Brokerage 339\u003c\/p\u003e \u003cp\u003ePros and Cons of FX Prime Brokerage 341\u003c\/p\u003e \u003cp\u003eExecution and Confirmation in an FX Prime Brokerage Environment 343\u003c\/p\u003e \u003cp\u003eThe Legal Architecture of FX Prime Brokerage 345\u003c\/p\u003e \u003cp\u003eThe FX Prime Broker and the Executing Dealer 346\u003c\/p\u003e \u003cp\u003eThe Master FX Give-up Agreement 346\u003c\/p\u003e \u003cp\u003eOther Elements of the Master FX Give-up Agreement 354\u003c\/p\u003e \u003cp\u003eThe FX Prime Broker and the Designated Party 359\u003c\/p\u003e \u003cp\u003eThe Executing Dealer and the Designated Party 366\u003c\/p\u003e \u003cp\u003eReverse Give-Up Relationships 366\u003c\/p\u003e \u003cp\u003eSummary 368\u003c\/p\u003e \u003cp\u003eAppendix 7.1: Master FX Give-Up Agreement 369\u003c\/p\u003e \u003cp\u003eAppendix 7.2: Compensation Agreement 384\u003c\/p\u003e \u003cp\u003eReferences 388\u003c\/p\u003e \u003cp\u003eAbout the Author 389\u003c\/p\u003e \u003cp\u003eIndex 391\u003c\/p\u003e \u003cp\u003e\u003cb\u003eDavid F. DeRosa\u003c\/b\u003e is President of DeRosa Research and Trading, Inc., a firm that conducts research into derivatives pricing, macroeconomics, monetary policy, and foreign exchange. He is an adjunct associate professor of finance at the Fu Foundation School of Engineering and Applied Science at Columbia University where he teaches courses in pricing models in financial engineering. David sits on the boards of several prominent hedge fund groups. He is the author of many books including \u003ci\u003eOptions on Foreign Exchange\u003c\/i\u003e (Wiley), \u003ci\u003eCentral Banking and Monetary Policy in Emerging-Markets Nations\u003c\/i\u003e, and \u003ci\u003eIn Defense of Free Capital Markets\u003c\/i\u003e. David received his PhD in finance and economics from the Graduate School of Business of The University of Chicago, and his BA in economics from the College of The University of Chicago. Before founding DeRosa Research, he worked on Wall Street as a foreign exchange trader, hedge fund trader, and portfolio manager. \u003c\/p\u003e  \u003cp\u003eThe volumes traded on the international foreign exchange market are huge, exceeding $4 trillion daily, far surpassing those of all other portions of the international capital market. Yet there is surprisingly little written to help professionals who want to learn about foreign exchange and to gain proficiency in the mechanics of trading in this important market. Even less has been written to explain the mechanics of foreign exchange operations, how money flows, and how the settlement process works. \u003c\/p\u003e \u003cp\u003e Traders, operations personnel, hedge fund managers, investment bankers, financial managers, attorneys, and financial regulators will all find this volume indispensable for understanding what happens behind the scenes between the execution of a trade and its settlement.  \u003c\/p\u003e\u003cp\u003e David DeRosa, a veteran of financial markets, explains how the foreign exchange market conducts trading and operations. He addresses the practical considerations of how market participants contract with one another to do trading and operations, conduct margin and credit, and undertake foreign exchange prime brokerage services.  \u003c\/p\u003e\u003cp\u003e DeRosa’s work is immensely practical. Understanding the operations process helps control costs, minimize errors, and to some extent preclude fraud. DeRosa’s explanation of operational conventions and their development also reveals the story of how the foreign exchange market grew and developed over the last four decades: a largely ignored but important corner of financial history.  \u003c\/p\u003e\u003cp\u003e\u003ci\u003eForeign Exchange Operations\u003c\/i\u003e walks the reader through all practical aspects of foreign exchange operations, from trade execution to documentation to trade confirmation. It focuses on the processes by which foreign exchange trades are settled using real time gross settlement systems. The later chapters focus on the legal and financial superstructure of the market, including master agreements, margin and collateral practices, and foreign exchange prime brokerage. DeRosa provides concrete examples to illustrate market practice, including more than 100 exhibits that contain real-world examples of trades, confirmations, settlement instructions, and other key documents.  \u003c\/p\u003e\u003cp\u003e Some of the main topics include:  \u003c\/p\u003e\u003cul\u003e\n\u003cli\u003eThe structure of the foreign exchange market \u003c\/li\u003e \u003cli\u003eQuotation and trading conventions \u003c\/li\u003e \u003cli\u003eCurrencies, exchange rates, and exchange rate controls\u003c\/li\u003e \u003cli\u003eForeign exchange deals, including spot, forward, and non-deliverable forwards \u003c\/li\u003e \u003cli\u003eForeign currency options, both vanilla and exotic options\u003c\/li\u003e \u003cli\u003eHow foreign exchange trades are executed and confirmed\u003c\/li\u003e \u003cli\u003eTrade settlements, including payment systems, DTNS, RTGS, and CLS Bank\u003c\/li\u003e \u003cli\u003eMaster agreements—the primary contracts that bind counterparties \u003c\/li\u003e \u003cli\u003eUses of credit, margin, and collateral in foreign exchange trading\u003c\/li\u003e \u003cli\u003eForeign exchange prime brokerage\u003c\/li\u003e\n\u003c\/ul\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47989231354085,"sku":"NP9780470932919","price":105.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9780470932919.jpg?v=1761783303","url":"https:\/\/k12savings.com\/products\/foreign-exchange-operations-isbn-9780470932919","provider":"K12savings","version":"1.0","type":"link"}