Foreign Exchange Markets: Concepts, Instruments, Risks and Derivatives
This course discusses the theory and structure of foreign exchange markets; the instruments that are traded; and the trading and settlement mechanisms. The learners will also learn to identify, assess, manage, address, and redress foreign exchange risks, and understand the techniques that can be used in order to hedge these risks.
Owing to the economic liberalization in several countries over the last few decades, the world has witnessed an exponential increase in the free flow of capital across countries, even more so in emerging economies. This has resulted in a globally interconnected ecosystem of banks and financial markets engaged in foreign exchange transactions that are continuously growing in volume, sophistication, and complexity. That, in turn, has attracted a plethora of participants whose explicit intention is to either profit from or hedge against the heightened level of risks in the foreign exchange markets.
Learning Outcome
- Explain the structure and functioning of foreign exchange markets
- Elaborate on how exchange rates quoted
- Explain the concepts that govern foreign exchange markets: interest rate parity, purchasing power parity, forex reserves, the balance of payments, central bank intervention, country risk/sovereign risk, and so on.
- Describe the causes and consequences of foreign exchange risks, and the tools and techniques to manage those risks
- Brief about various derivative products and examine their role in hedging against foreign exchange risks