• The author provides an objective analysis of the various tools available for currency management as well as examines the practical applications of the theories that are discussed

• Practical examples are supported by clear diagrams, figures and tables making the text highly accessible even to those who are new to the area of currency risk

• Topics covered include: defining and decomposing currency returns, foreign exchange research and choice of currency management styles, optimisation and hedge ratio, benchmark design and performance measurement, option pricing theory and dynamic hedging, emerging market currencies, liquidity, e-commerce and much more

CONTENTS
Chapter 1- Introduction
1.1 A Brief History of Modern Currencies
1.2 Some Facts About the Foreign Exchange Market
1.3 What is Special About Currencies?
1.4 Foreign Exchange Risk Management and Currency Overlay
1.5 About this Book

Chapter 2 - A Primer on Currency Risk
2.1 Introduction
2.2 Defining and Decomposing Currency Returns
2.3 A Simple Descriptive Tour of Currency Risks
2.4 Choice of Currency Management Styles
2.5 Risk Separation and Risk Responsibility

Chapter 3 - Currency Overlay Management
3.1 Introduction
3.2 Origins and Development of Currency Overlay
3.3 Definitions of Currency Overlay
3.4 What an Overlay Process Looks Like in Practice
3.5 Advantages of Employing Currency Overlay
3.6 Trends and Opportunities in Currency Overlay
3.7 Currency Overlay Managers: What do they do?
3.8 Historical Performance
3.9 Outsourcing Currency Management
3.10 Trading Styles
3.11 Overlay and Prime Brokerage

Chapter 4 - Foreign Exchange Research and the Choice of Currency Management Style
4.1 Introduction
4.2 Purchasing Power Parity (PPP) Based Models
4.3 Back to Fundamentals: Macro Models for Foreign Exchange Determination
4.4 Technical Analysis
4.5 Quantitative Models
4.6 Some Other Practicalities
4.7 Summary: Relevance of Forecast Models in a Portfolio Management Context

Chapter 5 -- Optimization and Hedge Ratios
5.1 Introduction
5.2 CAPM and Currencies
5.3 CAPM, Foreign Exchange Hedging and Overlay
5.4 Global Optimization and the Role of Currency
5.5 Hedge Ratios
5.6 Asset-liability Optimization
5.7 Currency Basket Hedging
5.8 Sector-based Investment and Currency Management

Chapter 6 - Benchmark Design and Performance Measurement
6.1 Introduction
6.2 Setting a Good Benchmark
6.3 Customized Benchmarks: Risk Separation and Risk Responsibility
6.4 Dissecting Currency Returns
6.5 The Currency Surprise Approach
6.6 The Excess Return Approach
6.7 Holding-based Benchmarks
6.8 Adjustment Style
6.9 Other Practical Considerations
6.10 Performance-based Benchmarks

Chapter 7 - Option Pricing Theory and Dynamic Hedging
7.1 Introduction
7.2 Option Replication and Dynamic Hedging
7.3 Transaction Costs and Option Replication
7.4 Portfolio Insurance
7.5 The Redundancy of Options
7.6 Skews and Smiles
7.7 Trading Opportunities in the Options Market
7.8 Some Volatility-based Trading Schemes
7.9 Speaking Greek - Some Closing Comments

Chapter 8 - Emerging Market Currencies
8.1 Background
8.2 Special Characteristics of Emerging Market Currencies
8.3 Forward Bias and Emerging Market Currencies
8.4 Implied Volatility
8.5 Other Related Issues
8.6 Summary

Chapter 9 - Liquidity, Online Dealing and E-Commerce
9.1 Introduction
9.2 Foreign Exchange Liquidity: Theory and Reality
9.3 E-commerce
9.4 Custodian Banks and eFX

Chapter 10 - Conclusions and an Overlay Checklist
10.1 Summary of the Main Arguments
10.2 A Currency Overlay Checklist

Hai Xin has been a Financial Engineer with the Investment Bank division of UBS (previously Swissbank Corporation, SBC Warburg, SBC Warburg Dillon Read, Warburg Dillon Read, and UBS Warburg - a succession of names that betokens a small anecdote in the consolidation of the banking sector) since 1996. The team of which he is a member, FX Financial Engineering, is a specialist group within FX Distributions at UBS that provides bespoke solutions for UBS's corporate and institutional clients. Between 2000 and 2002 Hai Xin was permanently inside the ″Chinese wall″ of UBS's Investment Banking Division, advising on currency risks embedded in merger and acquisition (M&A) transactions. Prior to joining UBS he worked as a researcher at AstraZeneca Treasury. Hai Xin obtained his Ph.D. in Quantitative Finance from Imperial College, London, and M.Sc. in Economics from the London School of Economics, both part of the University of London. His bachelor's degree is in Electronics and Information Science. Dr Hai Xin is also a director and major shareholder of a start-up ethnic health food manufacturing company based in the UK.