Diploma thesis is focused on analysis and comparison using financial derivatives to hedge currency risk. The first part of the thesis describes instruments used for hedging: forex forwards, futures contracts and currency options. Those instruments are used for back-testing in analytical part, currency crosses used for back-testing are EUR/USD, EUR/GBP and GBP/USD. The main goal of this thesis is to evaluate the posibility of using them to hedge currency risk, comparison of their efectivity and application.

The thesis examines foreign currency (FX) loans in Hungary and tries to compare them to leverage investment strategy known as carry trade. FX loans in Hungary after 2003 enjoyed great development, but only until the outbreak of the global financial crisis in 2008, which fully revealed the negatives associated with this type of financing, which resulted in a threat to the stability of the whole financial sector in the country. This thesis describes the situation in Hungary and examines the consequences connected with mass development of FX loans. There is an analysis of the currency crisis in 2008 as a part of the thesis. At the same time, the thesis aims to analyze the causes that were behind the unusually rapid growth of FX loans. The factors are divided on the demand and supply motivated factors.

A large part of the foreign exchange market concerns the trading of FX swaps. While entering a position in a FX swap does not cost any money, banks earn money on FX swaps when their customers cross the bid/ask spread, creating a perceived transaction costs for the swaps. To hedge the risks of their customer positions, banks enter new positions in FX swaps with other banks, crossing the same bid/ask spread. Traditional hedging methods does not take perceived transaction costs into account when determining hedge positions, resulting in greater portfolio losses than necessary for the banks. Therefore, the topic of hedging while taking transaction costs into account could be of great value. When valuing FX swaps and estimating risk factors in a FX environment, term structures need to be estimated for pricing the instruments. The estimation of term structures can be done using several ap- proaches, among them bootstrapping and interpolating the curve or parameterizing the curve, assuming it to be described by a functional form. These traditional methods of term structure measurement has the downside of being unstable and fluctuating greatly over time because of different local optimas each day, or result in very large pricing errors due to certain instruments needing to be excluded from the term structure measurement. These attributes result in capturing extra, unnecessary volatility in the curves which does not model the true risk, consequently estimating the risk factors wrongly when risk management and hedging needs to be done. The estimation of good quality term structures which are stable over time and result in low pricing errors are therefore of great interest to study. In this thesis, a FX swap portfolio is hedged using a Stochastic Programming (SP) model developed by Blomvall and Hagenbj ̈ork (2020). For the valuation of FX swaps in the portfolio and the generation of risk factors for the model, term structures were estimated using a multiple yield curve framework of Blomvall and Ndengo (2013), which penalizes pricing errors and use regularization functions to produce smooth curves. For both the term structure measurement method and the hedging method, a critical part affecting the per- formance of the methods lies in choosing good parameter values, which is what has been the main purpose of this study. The results show that good quality term structures can be estimated using the multiple yield curve frame- work if good parameter choices are made. The resulting curves fulfill the criteria of being stable over time while also keeping the price errors out-of-sample small. A portfolio hedged using a SP-model with certain chosen parameter values and also using the good quality term structures estimated is shown to eliminate a great deal of risk compared to an unhedged portfolio. When compared with a traditional hedging model called the Boxes model, the SP-model gains value from taking perceived transaction costs into account and thus manages to hedge the risks less costly than the Boxes model does.

This MSc Thesis was performed during a study stay at the Hochschule Furtwangen University, Furtwangen, Germany. This Master Project provides a theoretical background for understanding financial market principles. It focuses on foreign exchange market, where it gives a description of fundamentals and price analysis. Further, it covers principles of high-frequency trading including strategy, development and cost. FIX protocol is the financial market communication protocol and is discussed in detail. The core part of Master Project are sorting algorithms, these are covered on theoretical and practical level. Aggregator design includes implementation environment, specification and individual parts of aggregator application represented as objects. Implementation overview can be found in last Chapter.

Interest rates and foreign exchange spots are widely used within financial products. It is important to understand the risk arising from products that depend on interest rates and/or foreign exchange spots. In this project, the Hull-white model, a non-parametric and a semi-parametric bootstrap will be investigated for simulations of the interest rate of USD, EUR and SEK in conjunction with its corresponding foreign exchange spot. Models were first studied for dollar interest rates and the best model was selected by using variance/autocovariance tests and quantile tests. The chosen model was then used in the simulation of the interest rate in conjunction with the foreign exchange spots. The result from the tests demonstrated that the non-parametric bootstrap model performed the best and was used to simulate the interest rate in conjunction with the foreign exchange spots. The multiple simulations were used to back test a synthetic portfolio using a quantile test. The simulated distribution was found to be acceptable which therefore simulates an acceptable risk. We used data up until 2015 for the tests, this for not including the federal reserve raising the interest rate in the later part of 2015. Avoiding changes in the Fed funds rate was necessary as they are not predictable from sampling from historical data as is done in the model but they do have a very large impact on the shorter end of the curve. The findings in this project suggests that the non-parametric bootstrap model could be used in multiple curve simulations, which could be used for calculations of potential future risk for financial products. This is very important for companies involved with financial products, since strict rules and regulations have to be followed regarding risks within these products.

Within computational continuum mechanics there exists a large category of simulation methods which operate by tracking Lagrangian particles over an Eulerian background grid. These Lagrangian/Eulerian hybrid methods, descendants of the Particle-In-Cell method (PIC), have proven highly effective at simulating a broad range of materials and mechanics including fluids, solids, granular materials, and plasma. These methods remain an area of active research after several decades, and their applications can be found across scientific, engineering, and entertainment disciplines. This thesis presents a GPU driven PIC-like simulation framework created using the Vulkan® API. Vulkan is a cross-platform and open-standard explicit API for graphics and GPU compute programming. Compared to its predecessors, Vulkan offers lower overhead, support for host parallelism, and finer grain control over both device resources and scheduling. This thesis harnesses those advantages to create a programmable GPU compute pipeline backed by a Vulkan adaptation of the SPgrid data-structure and multi-buffered particle arrays. The CPU host system works asynchronously with the GPU to maximize utilization of both the host and device. The framework is demonstrated to be capable of supporting Particle-in-Cell like simulation methods, making it viable for GPU acceleration of many Lagrangian particle on Eulerian grid hybrid methods. This novel framework is the first of its kind to be created using Vulkan® and to take advantage of GPU sparse memory features for grid sparsity.

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[pt] Usando uma recém publicada base de dados pelo Banco Central do Brazil (BCB), estimamos os efeitos de intervenções cambiais realizadas entre 1999 e 2023. Em primeiro lugar, utilizamos um VAR estrutural em frequência diárias, identificado por meio de um instrumento baseado nos horários de anúncio das interveções. Estima-se que as intervenções são capazes de afetar o nível do Real por um período de 20 dias úteis, em 0.24 p.p. a cada bilhão de dólares empregados. / [en] Benefiting from a novel dataset published by the Central Bank of Brazil (BCB) we estimate the effects of FX Interventions from 1999 to 2023. We first employ a structural VAR with daily frequency identified with an instrument based on the timing of BCB announcements. Interventions are found to be effective in changing the USDBRL level over a period of 20 working days by 0.24 p.p. for each 1USD billion employed. We then implement an Artificial Counterfactual (ArCo) approach to each intervention episode separating them by side and instrument. Compared to SVAR interventions are found to be more effective although with smaller statistical significance. Spot Interventions are more effective than Swaps. We find no effects of interventions over the shortterm volatility of the USDBRL.

2007年是中華電信企業民營化的第二年，如同以往地在業務面及財務面締造了佳績。然而，在2007年9月時，中華電信與香港高盛簽下一紙長達10年期的外匯避險合約，使得中華電信在隔年第一季公佈高達新台幣40億元的未實現匯兌損失，引起市場一片譁然與投資人的輿論，認為此合約讓收入多以新台幣計價的中華電信陷入了不必要的衍生性商品陷阱之中。本個案讓閱讀者以當時中華電信財務長謝劍平的角度，帶領閱讀者解構、分析這個極具爭議的的結構型商品。過程中牽涉到避險決策、契約評價、代理問題、公司治理、外匯預測、市場效率性等議題。2008年10月契約觸及匯價32.7終止，中華電信最終獲利新台幣3010萬元出場，新台幣10多億的帳面損失也全數回沖。個案閱讀者能從中學習到重要的思考過程，並做出權衡之下對股東利益最好的決策，我們發現這個外匯避險契約本身並無絕對好壞，因為這是一個風險控管與節省成本的抵換關係，端看決策者的出發點、需求及風險偏好決定。 / 2007 was the second year after the privatization of Chunghwa Telecom, the financial performance was strong as usual. However, on September of the same year, Chunghwa Telecom had signed a 10-year currency hedging contract with Goldman Sachs, which leads to NTD 4 billion unrealized book losses in the first season of 2008. Investor and the public were shocked about it, because it was not compatible with the company’s corporate image, and the book losses was too huge. Many public opinion criticized that it was a big mistake for Chunghwa Telecom, which let them fall into the trap of financial derivatives. This case put students back to the scenario of September 2007, played the role as Chunghwa Telecom’s CFO, CP Shieh. The case will guide them understand how to decompose and analyze a tailor made structure product provided by investment bank. In the analyzing process, readers will involve many interesting issues, like hedging decision, contract valuation, agency problem, corporate governance, forex forecasting and market efficiency. October 2008, the contract knocked out by reaching NTDUSD quote 32.7. Chunghwa Telecom end up gained NTD 30.1 million from the contract and over NTD 1 billion unrealized book losses were also reversed. Case readers can acquire important intuition during the analyzing process and make decision based on the shareholder’s best interest. There is no absolute answer to dictate whether this hedging contract was good or not, because it was a tradeoff between risk control and cost saving. It depends on the decision maker’s point of view, demand and risk preference.

Software-Defined Networking (SDN) is a network architecture that differs from traditionalnetwork planes. SDN has tree layers: infrastructure, controller, and application. Thegoal of SDN is to simplify management of larger networks by centralizing control into thecontroller layer instead of having it in the infrastructure. Given the known advantages ofSDN networks, and the flexibility of cloud computing. We are interested if this combinationof SDN and cloud services affects network performance, and what affect the cloud providersphysical location have on the network performance. These points are important whenSDN becomes more popular in enterprise networks. This seems like a logical next step inSDN, centralizing branch networks into one cloud-based SDN controller. These questionswere created with a literature studies and answered with an experimentation method. Theexperiments consist of two network topologies both locally hosted SDN (baseline) and cloudhosted SDN. The topology used Zodiac FX switches and Linux hosts. The following metricswas measured: throughput, latency, jitter, packet loss, and time to add new hosts. Theconclusion is that SDN as a cloud service is possible and does not significantly affect networkperformance. One limitation with this thesis was the hardware, resulting in big fluctuationin throughput and packet loss.