StrikeAndYield crib sheet · information and education only
FX Derivatives
Optionality on currency pairs — vanilla calls and puts, barriers and digitals on exchange rates.
The shelf — 6 instruments
Medium 1
| FX Option | The right to exchange currencies at a set rate — hedging with the upside left open. |
Hard 5
| FX Accumulator | Buy currency at a discount, week after week — until the market moves, and the contract quietly doubles your obligation at the worst moment. |
| FX Barrier Option | Options with trapdoors: touch a barrier level and they spring to life — or vanish, premium and all. |
| FX Digital Option | All or nothing: a fixed payout if the rate ends (or trades) beyond a level. Probability, directly priced. |
| Quanto Option | An option on a foreign asset that pays in your own currency at a fixed rate. The FX risk vanishes from the payoff and reappears, priced, as a correlation term. |
| Target Redemption Forward | A hedge that pays a better rate than the market until it has paid enough — then it stops protecting you and starts multiplying against you. |
What moves prices here
- The forward points, not the spot — Interest-rate differentials set the forward
- Cross-currency basis — The arithmetic breaks when balance sheet is scarce
- The smile and the risk reversal — Which side of the pair the market fears
- Event risk with a date on it — Elections, referendums and meetings price into the surface
- Barrier and digital positioning — Defended levels attract and then release price
- Hedging demand from real business — Corporate and portfolio hedging is one-directional and scheduled
The calendar
| Daily | The cut and expiry times |
| Quarterly | Standard expiries and rolls |
| On the date | Elections and referendums |
| Month and quarter end | Basis and swap distortion |
| Policy meetings | Two of them, per pair |
Which risk decides, across the shelf
| Failure mode |
Decides | Share |
| Market | 6 of 6 | 100% |
| Credit | 0 of 6 | 0% |
| Liquidity | 0 of 6 | 0% |
| Funding | 2 of 6 | 33% |
| Operational | 2 of 6 | 33% |
Counted from the same table each product page prints. Not a
rating and not a ranking: there is deliberately no total.
Information and education only. Every page, figure and
calculator on this site exists to explain how financial instruments work. Nothing here is
investment, tax or legal advice, a recommendation, or a valuation you can rely on.
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