This training course aims to introduce key concepts and fundamental mechanisms of the foreign exchange markets and the various related instruments (spot exchange, forward exchange, derivatives) as well as their usage in trading and in foreign exchange risk hedging.

Learning Objectives:

At the end of this session, participants will be able to:

• Define the Foreign Exchange Market;
• Identify instruments and currencies traded in the market; 
• Demonstrate selection and pricing of instrument/currencies;
• List market participants
• Explain Forward and Futures;
• Identify risks prevalent in several products and hedging methods;
• Demonstrate trading, delivery and settlement system.

Course Outline

• Organization of the market and spot exchange operations
• Market history: end of the Bretton Woods and floating currencies
• Players typology: market makers, brokers, investors
• Transactions typology: arbitrage, hedging, speculation
• Electronic trading platforms
• Spot exchange:
• Direct quotations and indirect quotations
• Bid/ask spread
• Determination of FX crosses
• Chartist analysis and fundamental analysis  
• Forwards outright transactions and forex swaps
• Forwards
• Maturity stages and backward/forward
• Determination of the long-term exchange rate
• Application: hedging foreign exchange risk
• NDF (Non-Deliverable Forwards) market
• FX swap
• Outline of an FX swap: first leg and second leg
• Comparison between an FX swap and a forward contract
• Application hedging the FX risk
• FX futures and options
• Over-the-counter FX options
• Vanilla options (call/put): characteristics (sensitiveness), valuation
• Compound options: collar, straddle, strangle
• Application hedging FX risk
• Exercise: comparison between FX risk hedging using an option, compound options, and a forward contract
• FX futures options
• FX futures: characteristics, valuation, margin call
• Futures options: valuation, margin calls
• Comparison with OTC products
• Introduction to the Chicago Mercantile Exchange platform
• Case study - hedging FX risk
• Centralization of multiple currency cash flows
• Setting up a hedging strategy: selection of instruments and exposure level (total hedging or partial hedging) 
• Managing the hedging efficiency: neutral delat/gamma portfolio