Foreign Exchange, Money Markets and Derivatives

Course overview

Foreign exchange (FX) and money markets connect funding, trading and investment activity across the financial system. The programme examines their instruments and the liquidity characteristics of funding strategies, with the 2007-09 financial crisis providing context for changes in how institutions manage and diversify funding. An introductory market-size reference places daily FX transactions above $5 trillion.

Central banks occupy several modules. Delegates examine money creation and open market operations alongside quantitative easing, financial stability and reserve management, before studying the organisation and history of FX trading. Interest rate swaps and credit default swaps receive separate treatment, including pricing, documentation and the risk that a counterparty fails to perform.

Hedging connects the instruments to practice. Work addresses equity and fixed income exposure as well as currency, credit and volatility risks, followed by asset and liability management within treasury. The final module examines Basel III and other regulatory arrangements, including disclosure requirements, market abuse investigations and restrictions on banking activity.

Course objectives

By the end of the course, delegates will be able to:

Explain FX market mechanics and the roles of its main market actors
Analyse central banks' influence on money and FX markets
Examine money supply, open market operations and quantitative easing
Explain liquidity, capital adequacy and solvency
Analyse financial products traded in international money markets
Explain the reasoning behind forwards, swaps and options and their uses
Develop an understanding of the principal areas of financial risk management

Target competencies

Good practice in exchange-rate and interest-rate risk
Analysis of unconventional policies
Understanding global money and FX markets and capital flows
Thought leadership

Who should attend

This course suits:

Banking professionals, including wealth managers
Auditors, accountants and finance specialists
Risk managers
Treasury and product control professionals
Professionals working with financial services
Staff in corporate finance roles

Training methodology

Explanatory slides and case studies introduce the markets and their instruments.
Interactive workshop sessions examine Excel models in detail.

Course modules

Module 1
Connections between money markets and FX
- Assessing market size
- Issuing Treasury instruments, repos and commercial paper
- Understanding the Euromarkets
- Legacy matters concerning London Interbank Offered Rate (LIBOR)
- Secured Overnight Financing Rate (SOFR), SONIA and ESTER
- How jurisdictions issue Treasury bills
- Operation of the repo market
- Forward rates for currencies and interest rates
- Calculating yields adjusted for FX exposure
- Interest rate parity and arbitrage
- Examining current market conditions
- Money market spreads, risk premia and currency prospects
Module 2
Central banks and the financial system
- Introducing central bank functions
- Examining the Federal Reserve
- Examining the European Central Bank
- Examining the People's Bank of China
- Examining the Bank of Japan
- Examining the Bank of England
- How a central bank balance sheet is structured
- Features of central bank liabilities and assets
- Acting as lender of last resort
- How Open Market Operations work
- Unconventional policy and quantitative easing (QE)
- Central bank independence
- Macro-prudential policy and financial stability
- Forward guidance and openness in decisions
- Managing FX reserves and exchange-rate policy
- Payment arrangements: real-time gross settlement (RTGS), net settlement, Fedwire and Target2
Module 3
Money creation and monetary decisions
- The work of monetary policy committees
- The Federal Open Market Committee (FOMC)
- The Bank of England Monetary Policy Committee (MPC of BOE)
- The European Central Bank (ECB) Governing Council
- Governance of the People's Bank of China (PBOC)
- Understanding money supply
- How monetary tools change money supply
- Money creation in modern economies
- Setting inflation targets
- The role of central bank reserves
- Applying the Taylor rule
- Understanding the interest-rate term structure
Module 4
How the foreign exchange market operates
- FX market size, trading volumes, market actors and principal currency pairs
- Regional patterns in the location and timing of FX trading
- London's role in currency trading
- Historical development of foreign exchange markets
- International Monetary Fund (IMF) responsibilities and Special Drawing Rights (SDRs)
- Foreign exchange reserves worldwide
- Examining selected historical exchange rates
- Gold prices in relation to the US Dollar index
Module 5
Interest rate swaps and counterparty exposure
- Swap structures and terminology
- Business reasons for using interest rate (IR) swaps
- Comparing money market and IR swap rates
- Viewing a swap as combined forward rate agreements
- Pricing the fixed payment leg and reading swap markets
- Assessing counterparty risk
- Credit valuation adjustment (CVA) in derivatives pricing, trading practice and Basel regulation
- Over-The-Counter (OTC) trading and Swap Execution Facilities (SEFs)
- Collateralised OTC transactions and margin-based Central Clearing Party (CCP) platforms
- Arrangements for netting
Module 6
Credit default swap mechanics
- Credit default swap (CDS) terms: protection buyer, protection seller and reference entity
- Understanding naked CDS exposure
- Distinguishing CDS from financial insurance
- Equating contingent and actual payments
- Model inputs: default probabilities, loss given default (LGD) and the forward curve
- Markets for sovereign and corporate CDS
- Single-name, basket and nth-to-default products
- Determining whether a credit event has occurred
- Changes to International Swaps and Derivatives Association (ISDA) protocols for determining credit events
- Applying ISDA protocols
Module 7
Derivatives used in hedging
- Principles of hedging fixed income and equity exposure
- Equity portfolio hedges using index futures and options
- Calculating hedge ratios for equity futures
- Estimating portfolio beta
- Selecting options strategies
- Currency risk hedges using forwards
- Hedging credit exposure with swaps
- Hedging volatility using variance swaps
Module 8
Treasury asset and liability management
- Exposure to interest rate movements
- Revaluation of bank holdings as interest rates change
- Issues arising from fair value accounting
- Analysing duration gaps
- Forecasting interest rates
- Examining inflation-protected securities
- Estimating the Term Liquidity Premium in money markets
- How Funds Transfer Pricing (FTP) operates
- Contingency liquidity buffers
- Applying Funding Value Adjustment (FVA)
- Understanding bank funding curves
- Choosing FTP charges for strategic balance-sheet management
Module 9
Regulation across financial markets
- Introducing the Basel III framework
- Basel III provisions on market, credit, liquidity and operational risk
- Basel pillars 2 and 3 and central bank supervision
- Comparing macro-prudential initiatives with micro-prudential approaches
- Pro-cyclical and counter-cyclical approaches to risk
- Dodd Frank Act, Financial Stability Oversight Council (FSOC) and Volcker rule
- Investigations by regulators into market abuse
- USA authorities: Federal Reserve, Treasury, Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation (FDIC)
- UK authorities: Bank of England, Prudential Regulation Authority (PRA) and Financial Conduct Authority
- European bodies: ECB, European Stability Mechanism (ESM) and European Securities and Markets Authority (ESMA)
- International bodies: Bank for International Settlements (BIS) and Global Financial Stability Board
- Sarbanes-Oxley requirements for risk disclosure and accounting, including effects on IT policies
- Volcker Rule limits on bank activities and structure

Certificate

Every delegate who completes the course receives an ARUK Training Certificate of Attendance.

Frequently asked questions

How do I register?

Choose a date and city in the schedule and press Register, or send us an enquiry. Our team confirms your place and sends an invoice.

Are fees shown with VAT?

Fees are shown per delegate and exclude VAT, which is added to the invoice where applicable.

Can this course be delivered for our team only?

Yes. Any ARUK course can be delivered in-house at your premises, in a meeting room we book for you, or 1-to-1.

Is this course available online?

Yes. We run it live online with a trainer, on dates that suit your team, for £1,850 + VAT per delegate.

Is there a group discount?

Yes. 20% for 2 delegates, 35% for 3 delegates and 50% for 5 or more delegates on the same course.

Can the course be delivered in Arabic or another language?

Yes. Our courses can be delivered in English, Arabic or any European language, by a trainer who teaches in that language. Mention your preferred language when you register or enquire.

What certificate will I receive?

An ARUK Training Certificate of Attendance.

Classroom

Online (live)

Tailor this course

Course overview

Course objectives

Target competencies

Who should attend

Training methodology

Course modules

Connections between money markets and FX

Central banks and the financial system

Money creation and monetary decisions

How the foreign exchange market operates

Interest rate swaps and counterparty exposure

Credit default swap mechanics

Derivatives used in hedging

Treasury asset and liability management

Regulation across financial markets

Certificate

Frequently asked questions

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