Certified Foreign Exchange Professional

TABLE OF CONTENT

Introduction

• What is Foreign Exchange
• Why is foreign exchange important to us?
• What is a foreign Exchange market?
• Foreign Exchange as a Financial Market
• Foreign Exchange is an OTC Market (Over The Counter)
• Market Participants

History of Foreign Exchange

• Gold Standard
• Main Stages of Recent Foreign Exchange Development
• Important landmarks of Currency Markets

Foreign Exchange Basics

• Rates of Exchange
• Primary and Counter Currency
• Market Maker and Market Taker
• Bid/Offer Rate
• Middle Rate
• Cross Rates
• Factors affecting exchange rate fluctuations
• Supply and demand
• The Balance of Payments
• Confidence and speculation
• Central bank intervention
• Exchange Control
• Interest rate differentials
• Leads and Lags
• Hot Money
• Major Currencies
• Fixed, Floating and Dirty Float
• Trading Terminology

Foreign Exchange Risks

• Effect of fluctuations in exchange rates: exposure and foreign exchange risk
• Exchange Rate Risk
• Interest Rate Risk
• Credit Risk
• Country Risk
• How to manage your risk

Kinds of Foreign Exchange Market

• Spot Market
• Forwards Market
• Currency Forward Swaps
• Futures Market
• Strategies using Currency Futures
• Hedging using Currency Futures
• Speculation in Currency Futures
• Currency Options

Currency markets in india

• Product Specification
• Uses of Currency Futures at NSE
• Membership
• Clearing,Settlement and Risk Management

Fundamental Analysis

• Economic Fundamentals: Theories of Exchange Rate Determination
• Economic Indicators
• Financial and Sociopolitical Factors

Technical Analysis

• The Fundamentals of Technical Analysis
• Types of charts
• Trends, Support and Resistance
• Trend Reversal Patterns
• Trend Continuation Patterns
• Gaps
• Fibonacci Analysis and Elliott Waves Theory
• The Elliott Waves

Treasury

• Role of Treasury
• Front Office
• Back Office
• Credit Control
• Investment Bank
• Largest Full Service Investment Banks that hire Foreign Exchange Traders and Analyst

COURSE OUTLINE

Introduction

• Explains the concept of Foreign Exchange
• Explains the importance of foreign exchange and describes how foreign exchange facilitates transaction between entities in separate countries.
• Explains what a foreign Exchange market is and the functioning of the foreign exchange market
• Describes the feature that makes foreign Exchange market different from other financial markets and discusses the reason for participation in Foreign exchange market.
• Explains the reason behind foreign exchange being treated as an OTC Market (Over the Counter) and explains the various factors that influence the speculators growth on volume.
• Explains the level of participation in the foreign exchange market and elaborates the participation of central bank in the foreign exchange market
• Describes the role played by entities in the foreign exchange market such as banks,  such as banks, inter-bank broker, commercial companies, investment management firms, retail foreign exchange brokers, non-bankforeign exchange  company etc.

History of Foreign Exchange

• Understand the working of gold standard system facilitating the conversion of currency into gold at a fixed rate and explains the theories behind the collapse of the gold standard system.
• Explains the main stages in the development of the foreign exchange system i.e., from Bretton Woods system to the development of Euromarkets.
• Explains the important landmarks of Currency Markets

Foreign Exchange Basics

• Provides details on the exchange rate of currencies in foreign exchange dealing
• Explains the concepts of pricing of currency in terms of Primary and Counter Currency
• Understand the process of quotation of currency involving two parties market maker and market taker
• Explains the concept of Bid/Offer Rate
• Understand the purpose of middle rate and Cross Rates
• Understanding the reasons for exchange rate fluctuation and the factors affecting these fluctuations.
• Explains the factors affecting demand and supply and the inverse relation between them.
• Explains the concept of Balance of Payments
• Understand the relation between confidence of a dealer in the future positioning and speculation in a currency.
• Explains the need for intervention by the Central bank.
• Explains Exchange control and the factors affecting the exchange rates
• Explains the concept of Interest rate differentials  and the momentum of  payment in terms of leads and lags
• Understand the concept of hot money   in terms of availability of international money at a given point of time.
• Explains the major currencies being exchanged in the foreign exchange market such as US Dollars, Euro, Japanese yen, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar.
• Understand the methods employed by government to determine the value of the domestic currency in terms of other currencies by the method of fixed, floating and dirty Float
• Understanding the trading terminologies used when trading in the foreign exchange market.

Foreign Exchange Risk

• Explains the effect of fluctuations in exchange rates and exposure to foreign exchange risk on exporters and importers.
• Understand the consequences of exchange rate risk  due to continuous shift in the worldwide market demand and supply and explains the type of position limits (Daylight and Overnight)
• Explains the interest rate risk pertinent to currency swaps, forward outright, futures and options.
• Explains the meaning and forms of Credit Risk.
• Describes the intervention of government in the foreign exchange market causing Country Risk
• Understanding the management of risk by technical analysis (also called charting) to evaluate both risk and reward associated in trading.

Kinds of Foreign Exchange Market

• Explains the procedure of trading in Spot Market and the reasons for the popularity of currency spot trading.
• Explains the concept of forward exchange contracts, disadvantages of forward contracts and the procedure for calculating fixed forward rates in Forwards Market.
• Describes the process of determination of forward rates by means of currency interest rates and forward points.
• Explains the principle of Currency Forward Swaps, the types of currency swaps and its main uses.
• Understand the working of currency futures in the Futures Market, features of currency swaps and difference between futures and forward contracts.
• Explains the interest rate parity theory and the procedure of pricing of future contracts.
• Illustrating the strategies using currency futures
• Describes the procedure of hedging in currency market through two positions short-hedge and long-hedge.
• Explains the speculation in currency futures when anticipating differences in spot price and the prevailing future prices.
• Understanding the functioning of Currency Options and the major factors that have an impact on the option prices.
• Explains the process of measurement of the impact of the currency prices on the options premium in terms of Delta, Gamma, Vega and Theta.

Currency markets in India

• Explains the Product Specification (futures) in terms of underlying currency future contracts, trading hours, size of the contract, quotation, tenor of the contract, available contracts, mechanism for settlement and the final settlement day
• Describes the specifications of the contract, specifies the permitted lot size, tick size, quantity freeze, base price.
• Explains the procedure of price dissemination, setting of price ranges of contract to avoid erroneous order entry.
• Explains the trading system at NSE (NEAT), order condition, time related condition and pricing conditions laid down.
• Explains trading underlying versus trading futures.
• Describes the procedure of hedging at times of speculation, arbitrage strategies used for tapping the price-differentials in two or more market.
• Explains the different types of members admitted in the currency derivative segments such as online trading members of NSE, both trading members of NSE and clearing members of NSCCL, professional clearing members of NSCCL
• Describes about the participants, eligibility criteria for membership of an individual, partnership firms and corporate.
• Provides the eligibility criteria of professional clearing members (PCM).
• Explains the entities involved in clearing procedure, position limits, margins, mode of payment  settlement of contracts

Fundamental Analysis

• Understanding the Economic Fundamentals for determining the theories of exchange rate with the help of concepts such as purchasing power parity and theory of elasticity.
• Explains the Portfolio-Balance approach and the synthesis of traditional & modern monitory views.
• Explains the various economic Indicators such as GNP, GDP, consumption spending, Government spending, investment spending, net trading, capacity utilization etc.
• Explains about various inflation indicators and their measurement using economic tools such as Producer Price Index (PPI), Consumer Price Index (CPI), GNP deflators, GDP deflators, Employment Cost Index (ECI), CRB Index, and Journal of commerce Industrial price index (JoC).
• Explains the role of financial and Sociopolitical Factors and describes the political events and crisis in the trading system.

Technical Analysis

• Explains the Fundamental principles  of Technical Analysis based on DOW Theory
• Understanding the different types of charts used for representation.
• Explains about different trends representing the market movement, trend line and describes about the lines of support and resistance.
• Explains about the trend reversal patterns and trend continuation patterns
• Understanding of the Mathematical Modeling Methods (Indicators).
• Explains the Fabonacci Analysis and Elliot Waves theory.

Treasury

• Explains the role and responsibilities of treasury
• Explains the main activities performed by Investment banks and other venture in which investment bank operations can be integrated.
• Understanding the procedure involved in managing Front-Office, Middle-Office and Back-Office operations.