The Trading Floor with David Axtell

Some of the largest losses on a derivatives desk come from process rather than market direction. This episode covers confirmations, settlement, controls, documentation and operational failure.

This episode is part of FX Options Daily, a 30-day themed season of The Trading Floor covering pricing, hedging, exotics, risk and institutional FX options practice.

Full treatment: Chapter 15 of FX Options.

Educational content only. Nothing in this episode constitutes investment advice.

How regulation and internal models turn market risk into capital requirements. Explore the link between options exposure, capital allocation and the economics of running a derivatives business.

This episode is part of FX Options Daily, a 30-day themed season of The Trading Floor covering pricing, hedging, exotics, risk and institutional FX options practice.

Full treatment: Chapter 14 of FX Options.

Educational content only. Nothing in this episode constitutes investment advice.

Value at Risk can be mathematically correct and still miss the loss that matters. This episode examines confidence levels, holding periods, fat tails and why stress testing belongs beside VaR.

This episode is part of FX Options Daily, a 30-day themed season of The Trading Floor covering pricing, hedging, exotics, risk and institutional FX options practice.

Full treatment: Chapter 13 of FX Options.

Educational content only. Nothing in this episode constitutes investment advice.

Autocallables and hybrid structures can look complex, but they are built from familiar option components. This episode decomposes the payoff and shows where path dependency enters the risk.

This episode is part of FX Options Daily, a 30-day themed season of The Trading Floor covering pricing, hedging, exotics, risk and institutional FX options practice.

Full treatment: Chapter 12 of FX Options.

Educational content only. Nothing in this episode constitutes investment advice.

Variance swaps let traders take a direct view on realised versus implied volatility. This episode explains the payoff logic and how volatility can be traded without relying on market direction.

This episode is part of FX Options Daily, a 30-day themed season of The Trading Floor covering pricing, hedging, exotics, risk and institutional FX options practice.

Full treatment: Chapter 11 of FX Options.

Educational content only. Nothing in this episode constitutes investment advice.

Basket options combine several currencies into one payoff. Learn how correlation creates the apparent diversification benefit and why that benefit can disappear when markets become stressed.

This episode is part of FX Options Daily, a 30-day themed season of The Trading Floor covering pricing, hedging, exotics, risk and institutional FX options practice.

Full treatment: Chapter 10 of FX Options.

Educational content only. Nothing in this episode constitutes investment advice.

Asian options use an average exchange rate rather than a single fixing. This episode shows why average-rate structures fit recurring exposures and how averaging changes volatility and hedge behaviour.

This episode is part of FX Options Daily, a 30-day themed season of The Trading Floor covering pricing, hedging, exotics, risk and institutional FX options practice.

Full treatment: Chapter 9 of FX Options.

Educational content only. Nothing in this episode constitutes investment advice.

There's a number quoted daily on every major currency pair that, in theory, should be zero. It isn't, and hasn't been for nearly two decades. Episode five is the conceptual centre of the season: what the cross-currency basis measures, why covered interest parity broke in 2008 and never fully healed, and why it persists — balance-sheet costs and one-way hedging demand, not textbook mispricing. Host David Axtell proves with the book's own figures why a visible basis is not free money, and can turn a 15bp "pickup" into a six-figure loss. Companion season to Cross-Currency Swaps and Basis Trading, out 15 December.

Knock-in and knock-out barriers can radically change cost and risk. Understand how barriers behave as spot approaches the trigger and why discontinuous exposures require active management.

This episode is part of FX Options Daily, a 30-day themed season of The Trading Floor covering pricing, hedging, exotics, risk and institutional FX options practice.

Full treatment: Chapter 8 of FX Options.

Educational content only. Nothing in this episode constitutes investment advice.

Digital options pay a fixed amount if a condition is met and nothing if it is not. This episode explains their discontinuous payoff, pricing behaviour and concentrated risk around the strike.

This episode is part of FX Options Daily, a 30-day themed season of The Trading Floor covering pricing, hedging, exotics, risk and institutional FX options practice.

Full treatment: Chapter 7 of FX Options.

Educational content only. Nothing in this episode constitutes investment advice.