Foreign Exchange Workshop

Corporations and banks make and lose millions of dollars on the foreign exchange market each day. The mismanagement of foreign exchange currency exposure can mean financial disaster for a corporation. However, the corporation may not even know that it is exposed to such currency risk. The correct identification of currency exposure, the ability to operate effectively in the foreign currency markets and the correct implementation of hedging strategies can add handsomely to the bottom line of banks and corporations. This training course is designed to provide delegates with a concrete understanding of all aspects of foreign exchange. Participants will learn how to identify and manage foreign currency exposure, how the foreign currency markets work and how to be an effective player in these markets. This intensive course uses a balance of lectures, workshops, case studies and discussions.

  • Course Instructor

    The Course Director specialises in capital markets, risk management, and international project finance. She has considerable professional experience with the oil and gas, power, transport, and telecom sectors. She has published articles in the business press and co-authored several self-study guides covering international project finance, trade and export finance, foreign exchange, and financial futures.

An intensive three-day program that teaches the techniques & strategies to become an effective player in FX markets:

  • Examine the key characteristics of the FX markets
  • Hedging the risks of major and “exotic” currencies
  • Prospects for the “Euro”
  • Forwards and “non-deliverable” forward controls
  • Understanding FX swaps and arbitrage
  • How the FX futures and options markets work

Day 1

INTRODUCTION TO FOREIGN EXCHANGE MARKETS

Currency Movements Today: Volatility and Risk

  • Managing currency exposures
  • Market characteristics
  • “Exotic” currencies
  • The future of the “Euro”

SPOT MARKETS

Defining Terms

  • Transaction dates
  • Value dates
  • How currencies are expressed
  • U.S. terms and European terms

Bid-Offer Spreads

Calculating Cross Rates

Exotic Crosses

Exchange Rate Determination

  • Balance of payments
  • The role of the central banks
  • Fiscal and monetary policy
  • Purchasing power parity
  • Challenges of the European Monetary Union
  • Understanding “currency boards”

Forward Markets

Calculating Forward Rates

  • Discounts and premiums
  • Hedging with forwards

Swap Markets

  • Deriving swap points
  • Investment strategies and covered interest rate arbitrage

Day 2

Swap markets Continued

  • Exercises
  • Forward forwards

Forward Contract Default Risk

  • Market risk and delivery risk
  • Quantifying the risk
  • Capital requirements and default risk
  • Credit facilities and counterparty risk

Futures Market

  • Contract characteristics
  • Futures compared to forwards
  • Calculating costs
  • Margin requirements
  • Hedging with futures
  • Exercises

Non-Deliverable Forwards (NDFs)

  • Origins and currencies
  • Settlement mechanics
  • Exercises

Cross-Currency Swaps

  • Markets and participants
  • Role of the intermediary
  • Comparative advantage
  • Primary debt issuance and swaps

More on Cross-Currency Swaps

  • Compared to forward contracts
  • Pricing swaps
  • Swaptions
  • Exercises

Day 3

Currency Options

Definitions and Types

  • Puts/calls
  • American/European
  • OTC/listed
  • Pricing options

More on Options

  • Practical applications
  • Exotic options
  • Hedging options
  • Exchange-traded options
    -Options on futures
    -Calculating costs/margin requirements

Strategies for Managing Foreign Exchange Exposure

Types of Exposure

  • Cash
  • Transaction
  • Translation
  • Economic exposure

Internal Exposure Management Techniques

A Review of Online Trading Platforms

Self-Test

  • The Course Director specialises in capital markets, risk management, and international project finance. She works with  corporations, financial institutions, public agencies, law firms, and private equity investors. She has considerable professional experience with the oil and gas, power, transport, and telecom sectors.

    She began her career at JP Morgan Chase Manhattan Bank, where she structured highly leveraged transactions and project financings and advised clients on foreign exchange and other price risk management strategies. She was responsible for a team of analysts responsible for evaluating the quality of the bank’s global loan portfolio as well as that of its newly acquired affiliates. In that role she had extensive experience with workout and distressed debt.

    She has published articles in the business press and co-authored several self-study guides covering international project finance, trade and export finance, foreign exchange, and financial futures. The World Bank has published her articles on approaches to financial analysis in emerging markets.

    From 2000 to 2007 she was a member of the Technical Advisory Panel (TAP) of the Public Private Infrastructure Advancement (PPIAF) managed by the World Bank. In 2006 and 2007 she was the TAP’s chairperson. The fund provides technical assistance to emerging market governments in order to encourage private involvement in  infrastructure development. She received an M.B.A. from INSEAD, the European Institute of Business  Administration, in Fontainebleau, France. Her B.A. degree is from Princeton University.

    Courses run by this instructor