Foreign Exchange Markets: Concepts, Instruments, Risks and Derivatives

5 weeks (4 weeks of content and 1 week for the final exam).

Course Information

Course Length     : 5 weeks
Estimated Effort  : 4 weeks of content and 1 week for the final exam.

Course Overview

Owing to the economic liberalisation 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. This IIMBx course Foreign Exchange Markets: Concepts, Instruments, Risks, and Derivatives will unravel those complexities and help one gain a comprehensive understanding of foreign exchange markets.

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.

This course is part of IIMBx’s Professional Certificate program ‘Risk Management in Banking and Financial Markets’.

Professor PC Narayan

Course Instructor
Finance and Accounting
Indian Institute of Management Bangalore (IIMB).
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Course Syllabus

Week 1: Foreign Exchange Markets: Structure and Trading
    • Overview and Planner for Week 1
    • Foreign Exchange Market: An Overview
    • Types of Transaction Traded in the Foreign Exchange Market
    • Exchange Rates: Importance and Quotation
    • Participants in the Foreign Exchange Markets
    • How and Why do Exchange Rates Fluctuate?
    • Exchange Rate Pass Through
    • Summary and Additional Readings
    • Quiz Time: Weekly Graded Assessment 1
Week 2: Theories Underlying Foreign Exchange Markets
    • Overview and Planner for Week 2
    • Nominal Vs. Real Exchange Rates
    • Interest Rate Parity
    • Foreign Exchange Reserves
    • Balance of Payments
    • Central Bank Intervention
    • Country Risk
    • Country Risk Evaluation
    • Summary and Additional Readings
    • Quiz Time: Weekly Graded Assessment 2
Week 3: Foreign Exchange Risk
    • Overview and Planner for Week 3
    • Foreign Exchange risk-An Introduction
    • Managing Foreign Exchange Risk: Transaction Exposure
    • Managing Foreign Exchange Risk: Translation Exposure
    • Managing Foreign Exchange Risk: Operating Exposure
    • Summary and Additional Readings
    • Quiz Time: Weekly Graded Assessment 3
Week 4: Currency Derivatives
    • Overview and Planner for Week 4
    • Currency Derivatives Market: An Overview
    • Currency Options
    • Currency Futures
    • Currency Swaps
    • Summary and Additional Readings
    • Quiz Time: Weekly Graded Assessment 4
Week 5: Final Exam for the Course
    • Final Exam Instruction
    • Final Exam: FAQ
    • Final Exam: Knowledge Check

After successfully completing the course, learners should be able to:

  • 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

Executives, students pursuing post graduate and anyone who wants to upskill themselves in the field of Economics and Finance.

Natalia Garland

awesome and was explaining things so you could have understood.

Esha

Very well structured course and very lucidly explained topics. You ensured that a newbie also comprehends the course. I could not have learnt it faster and better.

Rinkan Rohit Jena

please sir include one technical analysis or base analysis.