Free module · Research & investment
FX & Commodities: Quotes, Carry, Curves & Hedges
Trace currency and physical-market cash flows before interpreting a price difference.
bid/ask units · forwards · FX carry · storage · futures margin · rolls · hedges
The building blocks
Currency pairs and futures curves encode both market expectations and contract-specific cash flows. Units come first.
- Write what one quoted unit buys or delivers.
- Trace financing and settlement in each currency or physical unit.
- Stress exchange rates, basis, storage and margin jointly.
Lessons in this module
- Invert both units and bid/ask sides
- Triangular conversion with executable sides
- Covered interest parity by matching currency cash flows
- Unhedged carry leaves exchange-rate risk
- Storage and convenience yield in a commodity forward
- Futures profit and margin cash demands
- Rolling futures without inventing a cash profit
- Minimum-variance cross hedging and basis risk
Practice and apply
- Stress unhedged carry — Borrow 100 domestic at 2%, invest foreign at 6% for one year; foreign currency loses 5%.
- Fund an adverse futures move — Long 2 contracts of 1000 physical units; settlement 80 to 77 currency per unit.
- Size the cross hedge — Covariance of matching spot/futures price changes 6, futures variance 9, inventory 30000 units, multiplier 1000.
Work through the practice exercises · Quant development tools