FOREIGN EXCHANGE MANAGEMENT

COURSE DURATION: 2 HRS PER WEEK FOR 10 WEEKSCOURSE 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)