At this advanced-level course, we shall present and analyse a number of advanced currency option structures. We start with a general introduction to currency options, and explain how "vanilla" and "cross rate" options are valued. We then establish analytic pricing formulas (such as the Garman-Kolhagen) as well as numerical procedures (such as the CRR tree) and simulation methods for valuation of more advanced options. We shall present and analyse a number of "exotic" currency options such as Asian, lookback, barrier, basket, compound, ladder and rainbow options, in each explaining how they are priced and hedged, and how the "greeks" are calculated and interpreted. Further, we present some advanced trading strategies and market arbitrage strategies using these options. Finally, we shall present and discuss ways of effectively managing the risk of currency options positions.
