Introduction To Foreign Exchange

Overview

The Introduction to Foreign Exchange course provides the delegates with a comprehensive view of this product, covering its historical development, current situation and trends, together with a detailed examination of the different instruments, procedures and risks involved.

Who should attend

Anyone with an interest in foreign exchange. Particularly junior and middle management currently involved in the back-office of wholesale banks, IT company employees providing solutions to banking organisations in multi-currency environments, HR professionals recruiting into this marketplace and non-banking personnel for whom a basic knowledge of this product and the financial risks associated with it would be of assistance in their day-to-day activities.

Course objectives

By the end of this two-day course you will have:

> an overview of the global foreign exchange environment

>a detailed understanding of the major products, procedures and risks associated with them

Course content

Historic Overview of Foreign Exchange

>Gold standard

>Bretton-Woods agreement

>Floating rates

>Euro currencies - Eurodollars

>EMU and the Euro

>Current trading volumes

Foreign Exchange and the Money Market

>An overview of the market

>Relationship between interest rates and currencies

>The yield curve

Introduction to Foreign Exchange Rates and Products

>Spot foreign exchange:

- date conventions

- simple rates

- cross-rates

> Forward foreign exchange:

- relationship between spot foreign exchange rates, interest rates and the forward rate

>Foreign exchange swaps:

- use as a funding tool

- calculation of effective rates

>Foreign exchange derivatives:

- foreign exchange futures

- foreign exchange options
- exchange traded
- OTC

Players in the Foreign Exchange Market

>Banks:

- traders

- market makers
- two-way price

>Fund managers

>Brokers

>Regulators

Trading Foreign Exchange

>The trading cycle:

- trade initiation and capture

- terminology
- long
- short
- running positions
- revaluations or mark to market
- realised and unrealised profits and losses

>The settlement cycle:

- trade capture

- confirmation matching

- payment instructions

- settlement

- failed trades

International Currency Clearing

>The principles of currency clearing:

- RTGS

- CHAPS

- CHIPS

>The payment mechanism in more detail:

- Nostro accounts

- payment instructions

- SWIFT

- cut-off times

>Current trends:

- CLS

A More Detailed Examination of the Risks Involved in Foreign Exchange

>Position, market or price risk

>Settlement or delivery risk

>Counterparty or replacement risk

>Liquidity risk

>Role of the regulator:

- capital adequacy

- Basel II

- the role of limits

>Reducing risks:

- hedging

- use of derivative products

>Risks in the settlement process:

- failed trades

- potential losses from failed trades

- strategies to reduce failed trades
- procedures
- confirmation matching
- Nostro reconciliation
- clearing houses
- automation

Foreign Exchange Derivatives in More Detail

>Foreign exchange futures:

- exchanges

- contracts

- margins

- special risks associated with derivatives

>Foreign exchange options:

- exchange traded

- Over The Counter (OTC)

General Accounting Considerations for Foreign Exchange

>The multi-currency general ledger

>The concept of base currency

>The concept of value date