Managing FX Risk in a Volatile World

Description

Currency risk affects any organisation operating across international borders – and volatility in FX markets has never been greater, with shock moves in a single day of up to 20% in major currency pairs.

No firm can afford to ignore these risks. ACF’s essential seminar on Managing FX Risk in a Volatile World explains how treasurers and bankers can effectively manage currency exposure using the latest hedging techniques.

Learning Outcomes

By attending this course, you will:

  • Review the workings of the FX spot and forward markets and the fundamentals of options
  • Gain an intuitive understanding of option pricing, and the significance of volatility
  • Understand option Greeks, and why they are important
  • Explore the key differences between FX options, and options on other underliers
  • See how FX options can be combined in different ways to create a wide variety of valuable structures
  • Examine how vanilla FX options can be combined to build targeted hedges, or to exploit specific views of the market
  • Develop an innovative and proactive approach to the handling of FX risk management needs

Who Should Attend

Anyone working in FX risk management, including corporate treasurers, companies with multi-currency operations, currency sales and trading professionals, or those advising clients on managing their FX risk.

CPD Credits

14 hours

Prerequisites

None

Seminar Content

Review of Foreign Exchange Spot and Forward Markets
  • Market mechanics
  • Quotation conventions
  • Outright forwards and swaps
  • Relation between spot and forward markets
  • Quoting forward rates and swap points
  • Forward discounts and premiums
  • FX swap points and interest rate parity
  • Handling Transaction Risk from Overseas Revenues
Review of Options
  • Options definitions and terminology
  • Calls and puts; buying and selling
  • American vs. European style
  • In-, at-, and out-of-the-money
  • Intrinsic and time value
  • Components of time value
  • What the buyer pays for – the true cost of an option
  • Value and profit profiles
  • Profit profiles at maturity
  • Profit profiles prior to maturity
Option Pricing – An Intuitive Approach
  • Types of option pricing model
  • Binomial option pricing
  • Monte-Carlo option pricing
  • Currency option pricing workshop
  • Put-call parity
  • Significance of volatility
  • Historic, implied, and experienced volatility
  • The term structure of volatility
  • Volatility smiles and skews
  • The Greeks – measuring the dimensions of option risk
  • Greeks workshop
Understanding FX Options
  • Calls are Puts!
  • FX option trading conventions
  • Dates: premium payment, expiry, and settlement
  • Tokyo vs. New York cuts
  • Quoting volatility
  • Quoting deltas
  • Live options vs. delta exchange
  • The 25 Δ strangle
  • Risk reversals
Building Option Portfolios
  • Horizontal, vertical, and diagonal spreads
  • Straddles and strangles
  • Ratio spreads and backspreads
  • Designing your own structure – a fluent transition between payoff diagrams and component parts
Hedging and Financial Engineering with FX Options
  • Comparison of using in-, at- and out-of-the-money options
  • True cost of options hedging – time value
  • Hedging techniques using short option positions
  • Creating and using collars or risk reversals
  • Creating and using spreads
  • Zero-premium hedges
  • Creating and using zero-cost collars
  • Creating and using participating forwards
  • Deferred and embedded premiums
  • Creating and using break-forwards
  • The “continuum” from in-the-money to out-of-the-money options
  • Hedging FX risk
  • Financial Engineering with Currency Options
Option Trading Strategies
  • Directional vs. volatility trading
  • Directional trading strategies
  • Near vs. far dates
  • Out-of-the-money vs. in-the-money
  • Options vs. cash
  • Volatility trading strategies
  • Directional and volatility trading with currency options

Dates and Locations

Date
Date(s): 5 Jun 2019 - 6 Jun 2019

Location
London

Category
Risk Management

Other Dates and Locations
Check our course schedule for alternative dates and locations where this course is offered.


   Note that the course fee of £2,100.00 already includes 20% VAT.

£2,100.00


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