THE FOREIGN EXCHANGE MARKET

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SUMMARY

This module enables participants to link the component foreign exchange markets into a whole. The survey of component markets includes the foreign exchange spot, forward, futures and swap markets. The dynamics, use and calculations of the foreign exchange markets are reviewed.

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OBJECTIVES

Upon completion of this module, participants will be able to:

1. Describe the major characteristics of the foreign exchange market.

2. Identify the links between the foreign exchange market and other domestic and foreign money markets.

3. Identify instruments and products in the foreign exchange market and describe their uses.

4. Analyze foreign exchange spot, forward and futures market timing in response to market information and trends.

5. Contrast U.S. terms from European terms in quoting conventions.

6. Calculate spot, forward and cross rates.

7. Calculate discounts and premiums from interest rate differentials.

8. Describe the roles of the major players in the foreign exchange markets including banks, traders, corporates and clearing houses.

9. Describe the risks in dealing in foreign exchange and how to control them.

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