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FX Forward Market – FX Swap Trading

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.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Describe how traders deal on a swap’s bid and offer price

    Explain the impact of interest rate movements on swap points

  • COURSE OUTLINE

    Topic 1: FX Swap Dealing Terminology & Mechanics

    Dealing FX Swaps

    o Dealing on the Swap Bid Price

    o Dealing on the Swap Offer Price

    Swap Cost & Earnings for Market Makers & Price Takers

    o High on the Bid & Low on the Offer

    o Low on the Bid & High on the Offer

    Topic 2: How Swap Traders Make a Profit or Loss

    Offsetting Swap Trades

    o Same Swap Points

    o Different Swap Points

    Impact of Interest Rate Changes

    o Higher Base Currenct Interest Rates than Variable Currency Interest Rates

    o Lower Base Currenct Interest Rates than Variable Currency Interest Rates

    Key Points for Profiting from FX Swap Trading

    Using Money Market & Derivative Products to Manage FX Swap Positions

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    60 Minutes

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