On FX Funding Requirements

Abstract

The matter of FX funding is analysed, first theoretically and then a solution to the problem is investigated. An analytical solution is first presented for the more general case, this is then followed by a Monte Carlo simulation carried out under specific constraints. The results are then compared to an alternative, purely linear, model to show how as the number of clients increases, the difference between the two becomes larger $\sim \sqrt{x}$. Further work is then proposed at the end to increase the generality of the problem.