Forums  > Risk Management  > Currency deltas of a FX option?  
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Total Posts: 8
Joined: Dec 2013
Posted: 2014-08-04 15:47
So when I have a spot FX position, it's common to break the legs and view the position by currency. For example, if I'm long 1mn EUR/JPY @ 130, I could say I'm long 1mn EUR and short 130mn JPY. These could be thought of as the deltas of my position with respect to the USD conversion rates (EUR/USD and JPY/USD, respectively).

Does it make sense to break out the (delta) risk in the same way for a vanilla call on spot EUR/JPY? Is the calculation just a matter of taking the derivatives with respect to EUR/USD and JPY/USD rather than EUR/JPY? Is this common practice?


Total Posts: 256
Joined: Oct 2004
Posted: 2014-08-05 08:09
Well given by construction EURJPY is only going to be EUR$ and $JPY, you can split your greeks whichever way you want.
It is mostly a problem regarding which way you want to hedge things?
Personally I put everything in $ crosses to make it easier, and I believe most do the same.

Et meme si ce n'est pas vrai, il faut croire en l'histoire ancienne


Total Posts: 866
Joined: Oct 2008
Posted: 2014-08-05 15:22
Yeah, our tools also convert everything to $ cross terms...

Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness...


Total Posts: 8
Joined: Dec 2013
Posted: 2014-08-05 19:58
Ok, that's what I thought. We hedge in USD as well. I was just surprised to not see the concept of splitting the greeks mentioned in any of the standard literature.


Total Posts: 60
Joined: Mar 2007
Posted: 2015-01-27 11:16

what do you do with your vegas?

isn't this touched on in Uwe Wystup's paper "How would the Greeks have hedged" ?

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