Foreign Exchange Option Market through the Lens of OTC Derivative Transaction Data: Recent Market Developments

Yasutaka Takizuka and Rinto Maruyama
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Yasutaka Takizuka: Bank of Japan
Rinto Maruyama: Bank of Japan

No 2021-E-7, Bank of Japan Review Series from Bank of Japan

Abstract: Foreign Exchange (FX) options are one of the tools used by non-financial corporations, institutional investors, and other market participants to hedge or take FX risks. Although those option transactions and prices can reflect the participants' risk awareness, it may not enough for monetary authorities to monitor FX options using the existing transaction statistics, whose data are often coarse and published less frequently. This report uses more granular data, the over-the-counter (OTC) derivative transaction data collected in Japan, and reveals some interesting characteristics of the USD/JPY FX option market, including trading volumes by option type, strike prices of traded options, and the trading relationships among the major sectors of market participants.

Date: 2021-12-27
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