Introduction to the Black-Scholes formula Latest Videos How Companies Use Initial Coin Offerings Guides Stock Basics Economics Basics Options Basics Exam Prep Series 7 Exam CFA Level 1 Series 65 Exam. One size does not fit all. As in the Black—Scholes model for stock options and the Black model for certain interest rate options , the value of a European option on an FX rate is typically calculated by assuming that the rate follows a log-normal process. Spreads for other strikes and maturities will vary. The FX calibration is performed in two separate stages. Amount is expressed as the potential payout. Consumer debt Corporate debt Government debt Great Recession Municipal debt Tax policy. Log In What would you like to do? All references on this site to "FXCM" refer to the FXCM Group. An investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share Comprehensive selection of industry standard derivatives pricing models and calibrators, any of which can be customized to meet your exact needs. Overview What Are Indices? Work With Investopedia About Us Advertise With Us Write For Us Contact Us Careers. To eliminate residual risk, match the foreign currency notionals, not the local currency notionals, else the foreign currencies received and delivered don't offset. An effect commonly observed immediately after news release is a high level of volatility leading to significant price fluctuations. Contango Currency future Dividend future Forward market Forward price Forwards pricing Forward rate Futures pricing Interest rate future Margin Normal backwardation Single-stock futures Slippage Stock market index future. The calibration is done by a sequence of techniques. Theoretically, forex rates are said to move due to two fundamental concepts — interest rate parity and purchasing power parity. There can be multiple inside day patterns day after day, indicating continuous reduction in volatility and hence significantly increasing the possibility of a breakout.