d-fine ASPECTS – An Afternoon on FX Target Redemption Forwards (TARFs)

Expert interchange on efficient modelling of FX Target Redemption Forwards (TARFs)

Date

11 November 2025

Time

15:00 – 17:00 (followed by Apéro & Networking)

Location

Loft Zürich, Bahnhofstrasse 63, 8001 Zurich [ GOOGLE MAPS ]

TARFs have recently become increasingly important in the Swiss market for FX exotics. Not only is careful modelling of these products very important for proper pricing and hedging, but they also cause additional complexity in the day-to-day front-to-back processes in a bank, regardless of whether they are synthesized and dynamically hedged or just traded back-to-back.

Amongst other aspects, we will address questions like: is local volatility sufficient or should you use LSV models? Do you have to rely on Monte Carlo simulation? How can you get stable Greeks and how do hedging strategies perform across different pricing models? Engage with industry experts from across Switzerland in exploring the latest trends and best practices.

Join us for an afternoon of talks and a networking apero afterwards.

Time	Content	Speaker
14:45	Registration
15:00	Welcome and Introductions	Dr Holger Plank
	Efficient Valuation of FX Target Redemption Forwards (TARFs)	Ferdinand Reuther, Dr Holger Plank
	FX TARF Pricing in Action: Live Demo of an Efficient Setup	Dr Oliver Krek, Dr Matthias Braun
	Hedging FX TARFs	Ferdinand Reuther
17:00	Apéro & Networking
18:00	Closing

Efficient Valuation of FX Target Redemption Forwards (TARFs)

Speaker: Ferdinand Reuther / Holger Plank

This talk presents efficient numerical approaches for valuing FX Target Redemption Forwards (TARFs). We discuss finite-difference methods under local volatility (LV) models and extend them to local-stochastic-volatility (LSV) frameworks. A multi-state regime-switching model for stochastic volatility is introduced, enabling fast and robust calibration. Finally, numerical results on calibration quality, pricing performance, and sensitivity (Greeks) are presented.

FX TARF Pricing in Action: Live Demo of an Efficient Setup

Speaker: Oliver Krek / Matthias Braun

A live demonstration showcases the bespoke FX TARF pricer embedded in a standard trading system. The presentation includes an overview of component setup and infrastructure, along with practical considerations. The demo focuses on assessing performance, comparing valuation results and sensitivities with standard Monte Carlo methods, and illustrating how the TARF pricer can be effectively applied in day-to-day trading and risk management operations.

Hedging FX TARFs

Speaker: Ferdinand Reuther

This talk focuses on robust hedging strategies for FX TARFs. We demonstrate how vanilla-option-based hedges can effectively manage the complex risk exposures of TARFs, explore the relationship between pin risks and model-implied smile dynamics, and compare empirical hedge performance using real market data under both LV and regime-switching LSV models.