You are a portfolio manager running the AUD/USD options book for your bank. You have reviewed the risk profile of your portolio and have become concerned about a short vega position building up around 3 month maturity which approximates strikes circa. 22-28 delta on the AUD/USD downside coupled with a buildup of a similar long vega position for an AUD/USD topside move around the same dates and deltas. You are concerned that recent global economic forecasts point to a substantially lower AUD/USD rate in the coming months - and fear that other institutions may have a similar risk profile on their portfolio. This suggests that any downward move in the AUD/USD rate will be fast due to cascading stop loss orders hitting the market. The likelihood of a move higher for the AUD/USD seems unlikely at this stage. Based on these views, a downward move in the AUD/USD rate would likely be accompanied by a ? in implied volatility rates across the curve. The most appropriate protective strategy for your vega position might be to ? with a maturity around ? and delta(s) of approximately ? . As a further consequence, you expect to see a substantial ? in short dated (1 and 2 week maturity) implied volatility rates reflecting the higher market demand for ? protection due to higher actual volatility in the AUD/USD rate.

You are a price maker running the AUD/USD options book for your bank. Your customer is an importer of electrical consumer goods who makes payment in USD, but they do not have any USD available. Your customer is required to hedge their FX risk on an upcoming exposure. They are VERY bearish on the AUD/USD rate. Unhedged, a weaker AUD/USD rate is ? to their profitability. Given their outlook for the currency, the most appropriate hedging stratey would be to:?

You are presented with the following maket data relating to AUD/USD: Spot: 0.6600Exchange rate (AUD/USD) rt: 8.00%Terms currency interest rate rc: 11.00%Risk-free rate T: 0.2500Time to maturity (years) Sigma: 20.00%Volatility R/R adjustment: 1.00%..for calls Determine the strike rate of the AUD put in relation to a 25.0% delta risk-reversal. (Please round your exchange rate to 4 decimal places)

You are an options portfolio manager. You are currently assessing the market, in search of an appropriate strategy to establish. The market is displaying the following characteristics: Over the past 6 months, markets have been quite unstable due to uncertainty about future political direction of the United States. After a resounding win for the incumbent party, the market is showing signs of relief that there may be political stability at least for the next four years. The volatility surface has been persistently for some time - especially in long dates. The most appropriate strategy to adopt would be to focus on establishing a long vega play. If your evaluation of the market is correct, you will benefit from a favourable higher shift in the volatility surface .

If you have agreed to sell USD for AUD forwardyou have a short position in the USD forward contract.until the exchange rate moves, you have not made money, so you're neither short nor long.you have a long position in the spot market.you have a long position in the USD forward contract.

You are an options portfolio manager for AUD/USD. You have just traded a 44 delta risk-reversal with an fellow institutional portfolio manager whereby you are the seller of AUD calls. The face value is A$5 million Determine the amount of the delta-hedge that will be required with this counterparty. (Please round your response to the nearest whole A$ - being a positive number if you buy AUD from the counterparty, and a negative number if you sell to the counterparty)