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.

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
• 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
   29 Apr 2024 - 2 May 2024
   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

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.