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FINANCIAL MARKET COURSES

Foreign Exchange

Courses In This Course

This course explains the functions, products, and workings of the foreign exchange (FX) market, the most liquid capital market in the world. Every day, trillions of dollars’ worth of currency flows through this market. The spot market and its dealers are at the heart of this activity, but there is also an important market for forward trading.

 

Every second of the day the value of currencies change, driven by global trade, investment, and speculation. This is a world with its own jargon, where bulls and bears fight for control, where a “yard” is a billion, and “cable” is an exchange rate between two of the most active currencies.

Objectives

Topics covered by the course include:

New or recent recruits to the futures desk

The changing nature of the foreign exchange business

The mechanics of spot and forward trading

The calculation of forward prices and cross-rates

The role of FX swaps and forward outrights in hedging currency exposures

Borrowing and investing using cross-currency swaps

The use of non-deliverable forwards (NDFs) with emerging market currencies

The key factors that influence exchange rates

Prerequisite Knowledge

Previous knowledge of this area is not required.

Learner Profile

This is a comprehensive course with something to offer everyone, from new recruits in banks and other financial institutions to more experienced personnel looking to refresh or expand their knowledge of specific areas.

  •    THE FOREIGN EXCHANGE BUSINESS

    Overview

    Against the backdrop of the global financial crisis and its ensuing fallout, the foreign exchange market has continued to grow. This course looks at the reasons behind this growth and performance, while examining the redistribution that is happening within the market. The course also describes consequences for the market of recent events such as the investigations into the WM/Reuters fix.

     

    In addition, the course outlines the typical structure by which a bank organizes its FX business and the different roles played by the various players within that structure. Finally, the course looks at some of the key risks generated by FX businesses and the solutions employed by banks to mitigate these risks

    Course Duration

    45 mins

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    Prerequisite Knowledge

    Foreign Exchange (FX) Market – An Introduction

  •    FX SPOT MARKET - AN INTRODUCTION

    Overview

    The foreign exchange market is a seamless 24-hour market that exercises an enormous influence over virtually every financial and economic trend. This course introduces the spot FX market and explains how currencies can be treated similar to commodities in terms of how they can be traded. There is a particular focus on the method by which they are quoted in the market and how a price can be ascertained for any currency pair.

    Course Duration

    60 mins

    Prerequisite Knowledge

    Foreign Exchange (FX) Market – An Introduction

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  •    FX SPOT MARKET - TRADING

    Overview

    Every second of the day the value of currencies will change, driven by global trade, investment, and speculation. This is a world where bulls and bears fight for control, where a “yard” is a billion and “cable” is an exchange rate between two of the most active currencies.

     

    This course looks at the buying and selling of currencies, the means by which currencies are traded, and how trades are actually transacted in the market. The course also describes the positions that traders may take in currencies, the constraints that may be applied to those positions, and how the profit/loss on those positions is calculated.

    Course Duration

    60 mins

    Prerequisite Knowledge

    FX Spot Market – An Introduction

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  •    FX FORWARD MARKET - AN INTRODUCTION

    Overview

    Many foreign exchange transactions settle on the spot date, but what happens if a market participant wants to exchange currency, say, in two months' time rather than in two days? The forward foreign exchange market, which accounts for almost two-thirds of the daily turnover in the entire FX market, provides a solution.

     

    A forward FX contract is simple a transaction agreed today that allows for the exchange of two currencies at a pre-specified settlement date in the future at a preset exchange rate. This course describes these contracts, their relationship with the money markets, and the different forms they take. The course also explores different settlement dates and how the market handles public holidays.

    Course Duration

    60 mins

    Prerequisite Knowledge

    FX Spot Market – Trading

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  •    FX FORWARD MARKET - CALCULATING SWAP

       /FORWARD POINTS & CROSS RATES

    Overview

    Forward points, also known as swap points, are the price paid by the holder of the higher interest-bearing currency to a counterparty holding the lower interest bearing-currency for the period of a forward FX transaction (outrights and FX swaps).

     

    This course explains how the forward rate, and by extension the forward points, can be derived from the interest rate differential between two currencies. For currency pairs not involving US dollar (cross rates), market participants must use the process of triangulation. The course describes in detail how to do this.

    Course Duration

    60 mins

    Prerequisite Knowledge

    FX Forward Market – An Introduction

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  •    FX FORWARD MARKET - USES OF OUTRIGHTS

       & FX SWAPS

    Overview

    This course describes some of the more popular forward foreign exchange instruments used on a daily basis in the market. A forward outright is an instrument that is constructed in a similar way to a spot transaction. However, the value date on the forward outright occurs after the spot value date. FX swaps, on the other hand, involve the exchange of two currencies on the spot value date and then the re-exchange of the currencies on the swap value date. The course looks at the main users of forward outrights and FX swaps and the reasons why they might use these instruments.

    Course Duration

    60 mins

    Prerequisite Knowledge

    FX Forward Market – Calculating Swap/Forward Points & Cross Rates

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  •    FX FORWARD MARKET - SHORT-DATED

       OUTRIGHTS & FX SWAPS

    Overview

    Some short-dated currency trades allow for settlement taking place before the spot value date. Instruments such as forward outrights and FX swaps are typically used for trades that settle after the spot value date. However, with some adjustments, these instruments can be used for short-dated trades. This course describes the mechanics of this in detail.

    Course Duration

    60 mins

    Prerequisite Knowledge

    FX Forward Market – Uses Of Outrights & FX Swaps

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  •    FX FORWARD MARKET - CROSS-CURRENCY

       BORROWING & INVESTING

    Overview

    Corporates and fund managers need to analyze all their options when they are investing or borrowing money. The best deal may not be obvious at first, so they need to weigh up the different options – these options can involve borrowing or investing in foreign currencies and the use of swaps to hedge the FX exposure. This course looks at the decision to invest/borrow in a foreign currency and the additional costs that may be incurred when hedging the associated FX risk.

    Course Duration

    45 mins

    Prerequisite Knowledge

    FX Forward Market – Calculating Swap/Forward Points & Cross Rates

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  •    FX FORWARD MARKET - FX SWAP TRADING

    Overview

    FX swaps are one of the most liquid financial instruments and are extremely important in currency markets. Their role as both a hedging instrument and a speculative tool have helped them become the popular instrument they are today. This course describes how FX swaps are traded from the viewpoint of the rates to be used, how the transactions are agreed between parties, and the profits/losses that are paid to the different parties to the swap. The course also looks at the effect that interest rate changes have on FX swaps through the underlying interest differential between currencies.

    Course Duration

    60 mins

    Prerequisite Knowledge

    FX Forward Market – Short-Dated Outrights & FX Swaps

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  •    FX FORWARD MARKET - NON-DELIVERABLE

       FORWARDS (NDFS)

    Overview

    Non-deliverable forwards (NDFs) have seen incredible growth as a means of hedging the volatility in the currencies of emerging economies. In Asia, their use has grown tenfold since the turn of the century. As trade between developed and developing economies continues to increase, so too does the level of demand for methods of hedging against adverse currency fluctuations.

     

    This course describes how NDFs are used to lock in future exchange rates, lists the details included in NDFs contract, and explains how they are traded. It also explores the payoff achieved through the use of an NDF.

    Course Duration

    45 mins

    Prerequisite Knowledge

    FX Forward Market – Calculating Swap/Forward Points & Cross Rates

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  •    FOREIGN EXCHANGE - FACTORS INFLUENCING

       EXCHANGE RATES

    Overview

    Currency values change almost every minute of the trading day as new information is released to the market. While some information might have no bearing on exchange rates, other types of information and data can be very important. For example, information relating to inflation, interest rates, government budget deficits, and international trade is collected and analyzed by traders because together they play a key role in determining the future strength of a country’s currency. This course looks at how each of these factors affects FX markets, in addition to examining the impact of changes in investor sentiment and the occurrence of unforeseen events.

    Course Duration

    45 mins

    Prerequisite Knowledge

    The Foreign Exchange Business

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  •    SCENARIO - USING FX SWAPS & OUTRIGHTS

       FOR CASH FLOW MANAGEMENT

    Overview

    The use and trading of foreign exchange forwards, particularly FX swaps, can be difficult to master. This scenario will provide you with a better understanding of the principles involved by examining a number of situations in which a corporate treasurer uses FX swaps and outrights to manage cross-currency cash flows. It will demonstrate how some exposures are identified, together with the trades and cash flows required to cover them in the FX market.

    Course Duration

    45 mins

    Prerequisite Knowledge

    A good understanding of both spot and forward FX trading is required.

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