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Monday, 23 January 2017

FX Delta

In FX world, we have a delta similar greek to measure foreign exposure - PnL change for a shift of 1% of the spot for outstanding foreign positions. Which turn out nothing but the discounted notional, below is the derivation. F = S * e^{r_f - r_d}
F * N = S * e^{r_f - r_d} * N
FX-Delta = \frac{\partial F}{\partial S} = \frac{(S * 1.01 - S) * e^{r_f - r_d} * N}{S * 1.01 - S} = e^{r_f - r_d} * N

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