FX

Fx (or Forex) refers to the exchange of (a pair of) currencies at an agreed time and exchange rate.

The main concepts in the FX model is the exchange rate between the two currencies, either the market rate or the rate agreed with an intermediary (strike) and used in transactions.

See Forex for more information.

Swarm models FX funds as a pair of currencies (one of them must be Euro) and an amount (notional), always expressed in the currency that is not the Euro.

An FX fund generally contains a large number of series that represent all the different operations in the total position, and its metric represents the whole history of the FX positions.

It is however possible to create a new fund every time a new operation is performed, in this case the fund metrics will refer to a single operation.

Two kinds of operations are implemented in the FX model:

• Spot: The immediate exchange of currencies at an agreed rate (generally the current market rate plus a markup).
• Forward: The exchange of currencies at a future date at a rate agreed today.

The operation also specifies the direction of the exchange, referred to the non-Euro currency, which can be either BUY or SELL.

Both operations are modeled as a pair of transactions, one for each currency, with the same amount and opposite directions.

In case of a spot the trading date and settlement date are the same, while in a forward the settlement date match the series maturity date (or the closing date when an anticipated closing happens).

Swarm FX actions

Swarm users do not handle directly the creation of the FX series or the couple of FX transactions, but they can perform four kinds of actions:

• On a FX Fund:
  • New conversion: Create a new FX series of type spot (named CONV) with two transactions representing a spot operation.
  • New hedging: Create a new FX series of type forward (named HDG) with two transactions representing an open forward operation.
• On a FX Serie:
  • Close: If the series represents a forward operation, the close operation creates two transactions representing a spot of opposite sign in order to realign the custodians. The specified exchange rate is used as the strike of the spot and also saved as the current series fxAtMaturityDate.
  • Roll: If the series represents a forward closed operation, the roll adds a nearly identical series (of type forward) starting from the current series maturity/closing date. The specified exchange rate is used as the strike of the new forward series.

During close and roll the default value for the notional is the one of the series being closed/rolled, but it can be overridden with a different value (partial close/renew).

The user must specify the trading and settlement dates, two custodians (one per currency), the notional, the direction of the operation and an exchange rate.

See above explanations on how these parameters are used in series/transactions creation depending on action type.

Anticipated closing

In case of a forward operation, it is possible to close the series before the maturity date, this is called an anticipated closing.

Everything happens as a normal closing, but the closing date is before the maturity date.