FX Options and Structured Products
Uwe Wystup
5 September 2006

Treasury management of international corporates involves dealing with cash flows in different
currencies. Therefore the natural service of an investment bank consists of a variety of money
market and foreign exchange products. This book explains the most popular products and
strategies with a focus on everything beyond vanilla options.

It explains all the FX options, common structures and tailor-made solutions in examples with
a special focus on the application with views from traders and sales as well as from a corporate
client perspective.

It contains actually traded deals with corresponding motivations explaining why the structures
have been traded. This way the reader gets a feeling how to build new structures to suit
clients’ needs.

Several sections deal with the quantitative aspect of FX options, such as quanto adjustment,
deferred delivery, traders’ rule of thumb, settlement issues.

One entire chapter is devoted to hedge accounting, where after the foundations a typical
structured FX forward is examined in a case study.

Prerequisite is some basic knowledge of FX markets as for example taken from the Book
Foreign Exchange Primer by Shami Shamah, Wiley 2003, see [86]. For quantitative sections
some knowledge of Stochastic Calculus as in Steven E. Shreve’s volumes on Stochastic Calculus
for Finance [88] are useful. The target readers are

ˆ Graduate students and Faculty of Financial Engineering Programs, who can use this
book as a textbook for a course named structured products or exotic currency options.
ˆ Traders, Trainee Structurers, Product Developers, Sales and Quants with interest in the
FX product line. For them it can serve as a source of ideas and as well as a reference
guide.
ˆ Treasurers of corporates interested in managing their books. With this book at hand
they can structure their solutions themselves.