Currency Markets - Trading, Investing and Hedging
Dates:
May 27 - 29, 2009
May 27 - 29, 2009
Location:
Prague, Mövenpick Hotel
Prague, Mövenpick Hotel
Price:
EUR 2,100
EUR 2,100
Lecturer:
Søren Plesner
Søren Plesner
- Currency Markets and Instruments
- Fundamental Analysis of Exchange Rates
- Technical Analysis of Exchange Rates
- Investing in Currencies
- Currency Trading Strategies
- Hedging Currency Risk of Investment Portfolios
- Hedging Currency Risk in Treasury
The purpose of this seminar is to give you a good and practical understanding of currency markets and instruments and of techniques, tools and strategies for currency investing, trading and hedging.
We start with a general introduction to currency markets. We give an overview of instruments traded, including spot, forwards, forward-forwards, long and short term swaps, futures and options. We also explain how global currency markets function, including practical issues such as quoting conventions, execution, clearing and settlement of currency transactions.
We then explain the economic, political and psychological factors that influence exchange rates. Economic factors include government budget deficits or surpluses; balance of trade levels and trends; inflation levels and trends; purchasing power parity. We explain what impact local, regional and international political conditions may have on currency markets, and we discuss possible causes for “psychological” market reactions such as changing risk aversion, “flight to quality”, carry trade reversal etc. We also look at technical considerations related to exchange rates and we explain approaches to forecasting currency movements and how technical analysis is used to spot trends, resistance levels etc.
Further, we explain how investors can invest in currencies as a separate asset class, we present a range of currency trading strategies and we discuss how strategies such as directional and volatility bets, risk reversals and numerous other strategies can be executed using forwards, futures and options. We explain the trading process and stress the importance of a disciplined approach to risk-taking.
Finally, we explain how currency risk can be managed in financial institutions and in the corporate treasury function. We explain how economic, translation, transaction and contingent exposures can be identified and measured, and we explain and demonstrate how these exposures can be hedged using forwards, swaps, futures and options. We also discuss the accounting, regulatory and other practical issues related to currency risk management.
We start with a general introduction to currency markets. We give an overview of instruments traded, including spot, forwards, forward-forwards, long and short term swaps, futures and options. We also explain how global currency markets function, including practical issues such as quoting conventions, execution, clearing and settlement of currency transactions.
We then explain the economic, political and psychological factors that influence exchange rates. Economic factors include government budget deficits or surpluses; balance of trade levels and trends; inflation levels and trends; purchasing power parity. We explain what impact local, regional and international political conditions may have on currency markets, and we discuss possible causes for “psychological” market reactions such as changing risk aversion, “flight to quality”, carry trade reversal etc. We also look at technical considerations related to exchange rates and we explain approaches to forecasting currency movements and how technical analysis is used to spot trends, resistance levels etc.
Further, we explain how investors can invest in currencies as a separate asset class, we present a range of currency trading strategies and we discuss how strategies such as directional and volatility bets, risk reversals and numerous other strategies can be executed using forwards, futures and options. We explain the trading process and stress the importance of a disciplined approach to risk-taking.
Finally, we explain how currency risk can be managed in financial institutions and in the corporate treasury function. We explain how economic, translation, transaction and contingent exposures can be identified and measured, and we explain and demonstrate how these exposures can be hedged using forwards, swaps, futures and options. We also discuss the accounting, regulatory and other practical issues related to currency risk management.
Currency Trading Strategies
- The Trading Process
- Formulating currency views
- Establishing risk-return objectives
- Choosing strategy and instrument(s)
- Choosing stop-loss and profit-take levels
- Implementation and follow-up
12.00 - 13.00 Lunch
13.00 - 16.30 Currency Trading Strategies (Cont’d)
- Cash Instruments or Derivatives?
- Pricing Models
- Currency forwards
- Currency options
- Directional Trading Strategies
- Spread Trading
- Bull and bear spreads
- Ratio spreads
- Calendar spreads
- Risk reversals
- Volatility Trading
- Straddles and strangles
- Butterflies
- Condors
- Follow-up Strategies
- Exercises and Workshop
Friday, May 29
09.00 - 09.15 Recap
09.15 - 12.00 Hedging Currency Risk in Bank and Corporate Treasury
- Sources of Currency Risk
- Types of FX Exposures
- Transaction risk
- Translation exposure
- Economic exposure
- The Hedging Process
- Measuring FX Exposure
- “GAP” and NPV approach
- Hedging Transaction Risk
- Using forwards
- Using “protective puts”
- Using “covered calls”
- Using swaps
- Hedging Economic and Contingent Exposures
- Using Exotic Options for Hedging Currency Risk
- Exercises
12.00 - 13.00 Lunch
13.00 - 16.00 Hedging Currency Risk in Investment Portfolios
- Sources of Return on Foreign Currency Hedged Portfolios
- Yield differential
- Expected currency returns
- Unexpected currency returns
- Hedging NPV (Fair Value) Risk with “Rolling” Hedge
- “Quanto” Hedges
- Hedging Cash Flow Risk
- Creating a Currency Overlay
- Using Cross Hedges and Proxy Hedges
- Workshop: Hedging Portfolio of Foreign Bonds/Stocks
Summary, Evaluation and Termination of the Seminar
