Mastering Foreign Exchange and Money Markets Training Course
Course Highlights and Agenda
IFF has developed this highly intensive programme incorporating the latest instruments, topics and trends used in foreign exchange and money markets. This course shows how both markets interact and need each other to flourish. It will provide delegates with a thorough understanding of the mechanics of the money markets and foreign exchange products and the risks incurred when using these markets. Delegates will work through case studies and worked examples enabling them to put the theory into practice and gain the skills needed when they return to work.
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Agenda
Mathematical Refresher
- Factors determining the value of money
- Future value and present value
- Discount factors and compound factors
- Money market formula
- Yield versus return
- Exercises
Market Conventions
- Actual / 365
- Actual / 365F: UK money market convention
- Actual / 360: US money market convention
Payment Date Conventions and How it Affects the Settlement Date
- Holidays
- Following business day convention
- Preceding business day convention
- Modified following business day convention
- Modified preceding business day convention
- FRN convention
Money Market Instruments
- Development of money markets
- The role of the central bank as lender of last resort
- Implementation of economic policy
- Discounted securities versus interest bearing securities
- Decomposition of cash flows
- Interest rate calculations
- Worked examples
Forward Forward Markets
- Developing a forward market from deposits
- Cash and carry arbitrage and crosscurrency basis
- Decomposition of cash flows
- Forward forward pricing
- Worked example
- Booking the trade
- Discussion on broken dates
Forward Rate Agreements (FRA)
- Developing FRAs from Forwards
- FRA Pricing
- Decomposition of cash flows
- FRA settlement amount and working out P&L
- Worked example
- Booking the trade
Overnight Index Swaps (OIS)
- Developing the OIS from loans and deposits
- OIS pricing
- The importance
Interest Rate Futures
- Quotation
- Interpolation
- ‘Points per day’
- Jumps on special days
Using Different Input Data for Forward Pricing
- Futures
- OIS
- FRAs
Spot FX
- Quoted and base currencies
- Direct and indirect quotation
- Treatment of holidays
- Onshore and offshore rates
Cross Rates
- The basics of cross rates
- Crosses with different conventions
- Crossing through USD or EUR
Forward FX
- Calculating forward outrights
- Hedging the cash flows
- Forward points (PIPS)
- Linear interpolation
- P&L calculation
FX Swaps
- Understanding the FX swap mechanism
- Hedging the cash flows
- Pricing FX swaps
- Calculating swap points
- Worked example
- Discussion of forward starting FX swaps
- Discussion of mismatch swaps
- Comparison of FX swaps with FRAs, forwards and futures
FX Risk
- Splitting between spot and forward desk
- Business day
- The importance of NY EBS close
- Measurement of risk
Currency Swaps
- Understanding the currency swap mechanism
- Pricing currency swaps
- Comparison of FX swaps versus currency swaps
- How cross basis arises
- How this affects forwards
FX Specialities
- Pre-spot prices (tom-next pricing)
- Non-Deliverable Forwards (NDF)
Covered Interest Arbitrage
- Selecting the ‘right’ investment
- Carry trades
- Worked example
FX Options
- The spot, forward and option arbitrage triangle
- Hedging an FX option with FX forwards
What Moves the Markets?
- Fundamental versus technical analysis
- Market views
- Algorithmic trading
- Economic factors
- Central bank policy
- Liquidity management
- Currency interventions
- Purchasing power parity
- The role of hedge funds
What You Will Learn
Attend this intensive two-day programme and you will:
- Develop a thorough understanding of money market and foreign exchange instruments
- Gain the skills to calculate and price the extensive array of FX & MM instruments
- Unravel the complexities of the markets considering current regulatory concerns and money market risk management
- Get to grips with how both markets have changed since the credit crisis and how this in turn affects the hedging of certain products
- Gain the skills to identify arbitrage opportunities across currencies
- Benefit from the extensive use of worked examples and practical case-studies that will help you make the transition from theory to practice
