Financial Training Training

Introduction to Foreign Exchange

Duration

2 day

The aim of this course is to provide participants with the skills and techniques necessary to understand, analyse, measure and assess a variety of Foreign Exchange and FX Option Products.

Course Agenda

DAY 1

Foreign Exchange

Session 1

The Spot Foreign Exchange Market

• Foreign exchange and impact of the Euro
• Economic factors that can influence foreign exchange
• Spot quoting and the Euro
• Inverse quoting and market practice

Case Study: Participants will complete some spot foreign exchange exercises.

Session 2

Forward Foreign Exchange

• Confirm understanding of derivation of the forward rate
• FX forward point formula
• The classic form of the FX swap
• All in structures for client and bank

Case Study: Participants will create an FX swap for a corporate institution and consider the difference between dealing an “all in” deal and traditional swap.

Session 3

Case Study: Identify a local mid-sized corporate who is an active FX participant and review the effectiveness of its hedging strategy.

Session 4

Basic Trading game

Session 5

FX Options

• Profit and loss (expiry) profiles
• Put/call parity
• The building blocks of options
• Risk and sensitivity ratios
• Delta, Gamma, Theta, Vega
• Risk management with options

Case Study: Participants will create and use an FX option.

DAY 2

FX and Currency Derivatives

Session 1

Non-deliverable forwards

• Definitions and market conventions
• Product structure – what the NDF represents
• Deriving the price
• Uses and applications
• Contractual and settlement issues

Case Study: Participants will use an NDF and determine arbitrage opportunities.

Session 2

Exchange traded FX derivatives

• Defining the Derivative
• FX Derivatives available
• FX futures
• Contracts and margining systems
• How the products work
• Benefits and risks in using derivatives

Case Study: Participants will use Futures to hedge a corporate institution and compare the result with an OTC hedge.

Session 3

Overview of most popular FX Option structures

How to construct and when to use:

• Straddles, Risk Reversals, Strangles, Butterflies
• Ratio spreads
• Calendar spreads
• Enhanced Forward
• Knock Out Forward
• Knock In Forward

Case Study: Look at a variety of structures – how have these been used effectively by mid-sized corporates.

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