Foreign Exchange (FX) & Money Markets Program

Programme description & objectives

Anchored by relevant financial experts, the program on Foreign Exchange (FX) and Money Markets is structured to share knowledge and expertise aimed at equipping the delegates with the prevailing trends in both markets. The course would provide firm grounding in the instruments and activities of the international money and FX markets. The program would further create clarity and ensure a full understanding of the scale, speed and apparent diversity of the markets in a world of globalization. In recent years, the importance of the money markets has become even greater as financial institutions focus more closely on the management and diversification of their sources of liquidity, apply greater discipline to their funding and examine the attractions of short term investment and trading strategies. The course emphasises the integrated nature of the market – in particular, how different instruments perform the same or similar functions and the opportunities this provides for arbitrage and hedging. Finally, the course analyses the liquidity characteristics and risks of different instruments and funding strategies.

Venues, Dates & Cost

VenuesDubaiDublinEdmontonGhanaLondonNigeria
DatesTBDTBDTBDTBDTBDTBD
Cost$4,000 per participant (USD) (=N=)

For Whom

  • Policy Staff of Central Banks
  • Bank and Non-Bank Financial Institutions
  • Development Banks
  • Regulatory & Supervisory Agencies
  • Regulators of Foreign Exchange Markets and Operations
  • Financial Crime & Fraud Prevention Employees

Module 1: Definitions & Overview

  • Money Market Fundamentals
    • Liquidity and risk management
    • Distinguishing money vs. capital markets
    • Primary & secondary characteristics
    • Drivers of rates of return
    • Role of Central Bank and monetary policy
    • The depo market and LIBOR & Euribor
    • How Libor is calculated and its shortcomings (2008 Crisis)
    • Market conventions and calculations
    • Overnight market differences
    • Overnight rates & indices (EONIA®, Fed funds rate)
    • Exercise: Libor computations

Module 2: Traditional Cash Instruments

  • Instrument Types
    • Discount vs. interest bearing
    • Secured vs. unsecured borrowing and lending
    • Concept of 'marketable' securities
  • Treasury Bill Market
    • Source of government funding & monetary policy
    • Quotation of US & UK T-Bills
  • Certificate of Deposit (CD)
    • Issuers and purpose
    • Cash flows & holding period return
    • Market regulation post-Financial Crisis
  • Commercial Paper (CP)
    • US & Euro CP markets
    • Quotation methodologies
    • Calculations
    • Issuance programmes and rates
  • Other Discounted Paper
    • Bills of Exchange
    • Credit, liquidity and other drivers
    • Exercise: Calculating holding period returns

Module 3: Securitized Funding

  • Repo Basics
    • Repo fundamentals & post-crisis importance
    • Eligible collateral
    • GC vs. SC collateral, substitution rights
    • Repo mechanics
    • Repo vs. reverse repo
    • Classic repo vs. buy/sell-back
    • Securities lending
  • Repo Risks & Math
    • Price and interest calculations
    • Credit & liquidity exposure
    • Collateral management
    • Margin haircut agreements
    • Collateral custody structures (bilateral, HIC, tri-party)
    • Case study: Calculating repo cash flows

Module 4: Uses & Applications of Repo

  • Applications
    • Funding trading positions
    • Short selling
    • Matched book trading
    • Yield enhancement trades
    • Riding the yield curve
    • ‘Figuring the tail’ and understanding the bet
    • Case study: Yield curve trade

Module 5: The FX Market

  • Spot FX
    • Market organization
    • Quoting spot FX rates (direct vs. indirect quotes)
    • Market conventions & reciprocal rates
    • Cross rate calculation
    • Position keeping and spot book monitoring
    • Case study: Cross rate calculations & managing spot book

Module 6: The Forward FX Market

  • Forwards & Swaps
    • Outright forward rate & points
    • Value dates
    • Premium vs. discount
    • FX swap market and rate calculation
    • Why banks prefer swaps for hedging
    • Sensitivity to rate changes
    • Historic rate rollovers
    • Swaps for funding
    • Short dates & calculations
    • Mark-to-market forwards and swaps
    • Forward-forward transactions
    • Time options (with calculations)
    • Non-deliverable forwards (NDFs)
    • Case study: Forward points, MTM, time options

Module 7: Risks in Foreign Exchange

  • Risk Types & Mitigation
    • Credit risk & market replacement risk
    • Delivery (Herstatt) risk
    • Mitigation techniques: Netting, CLS