Foreign Exchange & Forex Risk Management

Syllabus

KMBN FM04

FOREIGN EXCHANGE & FOREX RISK MANAGEMENT

Unit 1                                                                                                                                           (8 Hours)

Foreign Exchange and Foreign Trade, Exchange Rate, Foreign Exchange as Stock, Balance of Payments, Balance of Payments Accounting, Components of Balance of Payments; Current Account, Capital Account, Official Reserve Accounts, Debit and Credits Entries, International Exchange Systems; Fixed and Floating Exchange Rate System. Exchange Rate System Prior to IMF; Gold Currency Standard, Gold Bullion Standard, Gold Exchange Standard, Exchange Rate System Under IMF: Bretton Woods System, The Smithsonian Agreement, The Flexible Exchange Rate Regime.

Unit 2                                                                                                                                           (8 Hours)

Convertibility of Rupee; Current Account Convertibility, Capital Account Convertibility; Theories of Foreign Exchange Rate: Purchasing Power Parity (PPP), International Fisher Effect (IFE), Interest Rate Parity (IRP); Administration of Foreign Exchange; Authorized Persons, Authorized Dealers, Authorized Money Changers; Foreign Currency Accounts: Nostro Account, Vostro Account and Loro Account in Foreign Transactions..

Unit 3                                                                                                                                           (8 Hours)

Foreign Exchange Transactions; Purchase and Sale Transactions; Exchange Quotations: Direct and Indirect Quotations, Two Way Quotation; Spot and Forward Transactions: Forward Margin, Factors Determining Forward Margin; Merchant Rates: Basis of Merchant Rates, Types of Buying and Selling Rates, Ready Rates Based on Cross Rates; Forward Exchange Contract: Fixed and Option Forward Contracts, Calculation of Fixed and Option Forward Rates; Inter Bank Deals; Execution of Forward Contracts.

Unit 4                                                                                                                                           (5 Hours)

Exchange Dealings: Dealing Position- Exchange Position, Cash Position; Accounting and Reporting: Mirror Account, Value Date, Exchange Profit and Loss, R Returns; Forex Risk Management: Risk in Forex Dealing, Measure of Value at Risk; Foreign Exchange Markets; Settlement of Transactions: Swift, Chips,

Chaps, Fed wire.

Unit 5                                                                                                                                           (8 Hours)

Exchange Risk: Exchange Exposure and Exchange Risk; Transaction Exposure, Managing Transaction Exposure: External Hedge-Forward Contract Hedge, Money Market Hedge, Hedging with Futures and Options, Internal Hedge; Translation Exposure, Methods of Translation, Managing Translation Exposure; Economic Exposure, Managing Economic Exposure; Interest Rate Risk.