| Intermediate | CPD: 14 hours | 4 half-days | Virtual |
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.
Prerequisites
None
Book Now!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
- computer 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
- computer 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
- computer 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
- computer 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
- computer Hedging FX risk
- computer 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
- computer Directional and volatility trading with currency options
When and Where
21 Jan 2025 - 24 Jan 2025
a.m. sessions – 08:00 to 12:00 (for Asia / EMEA participants)
p.m. sessions – 13:00 to 17:00 (for EMEA / Americas participants)
All times are GMT (London time)
Virtual
Risk Management
Book Now!
Other Dates and Locations
Search for Managing FX Risk in a Volatile World in our course schedule for alternative dates and locations where this course is offered.