that solves for the EUR put strike such that the two legs end up
equally valued.
So what’s the advantage of using Python instead of a manual
process for pretrade indications? It can save time, eliminate cler-
ical errors—and improve the quality of your output (FIG. 3). In addi-
tion, Python makes it easy to create state-of-the-art term sheets
that contain pricing charts and indications for a set of structures.
To download a document with the complete sample code
for pricing these structures, go to {DOCS 2092163 <GO>} and
click on the gray button.settlement dates are set, in this case the option is set to expire
on Nov. 16, 2020. The option’s strike price is set equal to the at-the-
money forward rate using the data series ticker {FX1YEUUS Index},
the one-year forward rate in EURUSD. Run this code, and you’ll
have generated a vanilla call from your Python program.
Now, suppose you want to price the option at five different
dates and at five different market levels for EURUSD. This is the
kind of request that can start to get laborious quickly. Here, though,
a couple more lines of code can take care of it (FIG. 2). In this case,
the code specifies five particular dates and levels that are 5%,
10%, 15%, 20%, and 25% above spot rates.
IT’S VERY EASY to set up an automatic pricer this way. For a collar,
you’d typically set the EUR call strike to 25 delta and create a loop
Tonin is Americas head of the financial products knowledge group
and Popper leads the MARS API engineering team
at Bloomberg in New York.Fig. 3 The code makes it easy to output a set of prices that you can share with your client.
Client needs to buy EUR and sell USD on the following dates:Forward
Delivery Date Forward Rate
11/15/2019 1.1160
12/16/2019 1.1185
1/15/2020 1.1212
2/18/2020 1.1240
3/16/2020 1.1260Vanilla Option: Client Buys EUR Call
Delivery Date Strike Premium
11/15/2019 1.1160 1.08%
12/16/2019 1.1185 1.30%
1/15/2020 1.1212 1.46%
2/18/2020 1.1240 1.64%
3/16/2020 1.1260 1.79%25-Delta Option: Client Buys EUR Call
Delivery Date 25-delta strike 25-delta premium
11/15/2019 1.1377 0.51%
12/16/2019 1.1451 0.59%
1/15/2020 1.1513 0.65%
2/18/2020 1.1582 0.70%
3/16/2020 1.1635 0.75%Collar
Delivery Date Client buys EUR Call Client sells EUR Put
11/15/2019 1.1377 1.0991
12/16/2019 1.1451 1.0991
1/15/2020 1.1513 1.0991
2/18/2020 1.1582 1.0991
3/16/2020 1.1635 1.0991Call Spread
Delivery Date Client buys EUR Call Client sells EUR Call Premium
11/15/2019 1.1377 1.1620 0.50%
12/16/2019 1.1451 1.1749 0.55%
1/15/2020 1.1513 1.1852 0.59%
2/18/2020 1.1582 1.1966 0.63%
3/16/2020 1.1635 1.2057 0.67%50% Participating Forward
Delivery Date Forward Rate
11/15/2019 1.1327
12/16/2019 1.1369
1/15/2020 1.1409
2/18/2020 1.1452
3/16/2020 1.148426