FOREIGN EXCHANGE MANAGEMENT

COURSE DURATION: 2 HRS PER WEEK FOR 10 WEEKS

COURSE CREDITS: 02

1. INTRODUCTION TO FOREIGN EXCHANGE (2 HRS)

 Sources and Uses
 International exchange system and balance of payment (BoP) framework,
 International financial institutions ,
 Basic glossary of foreign exchange market

2. FOREX MARKETS (2 HRS)

 Regulatory framework (Acts and institutions engaged in regulation, growth and
development of FX) in India as well as in developed countries.
 Market organization
 Spot market
 Quotations and conventions
 Forward foreign exchange
 FX Swap
 Outright forwards
 Market participants

3. FX DEALINGS – SPOT MARKET (2 HRS)

 Settlement of spot transactions

 Cross-rates – Mechanics of calculations

4. CROSS RATES IN SPOT AND FORWARD MARKETS: CALCULATIONS (2 HRS)

5. FOREIGN EXCHANGE MARKET: FUNDAMENTALS (3 HRS)

 Factors affecting FX market
- Interest rates

- Foreign policy

- Balance of Payment

- Fiscal and Monetary Policy

 - Purchasing Power Parity

 Role of Central Bank – RBI in

- Currency intervention

- Reserve Management

6. FX SWAP AND CROSS CURRENCY SWAP (3 HRS)

 Swap mechanism
 Basic Pricing and Valuation
 Application of swap contracts in asset liability management

7. FOREIGN EXCHANGE RISK MANAGEMENT (4 HRS)

 Introduction and need of risk management

 Types of risks and instruments to hedge forex risks
- Currency futures and currency options

- FX exposure and transaction risk

- Market Risk

- Counterparty Credit risk

- Settlement risk

- Measurement Techniques and Management Practice

8. CORPORATE HEDGING PRODUCTS – STRUCTURED FX HEDGE

INSTRUMENTS (2 Classes)

 Participating and range forwards

 Barrier structures
 Cylinders
 Knock-out forwards
 Exotic and vanilla products

BASIC TEXT
 A. V. RAJWADE: Foreign Exchange: International Finance and Risk Management (Universal Law
Publishing Co. Pvt. Ltd)