Certified Foreign Exchange Professional

Certified Foreign Exchange

Professional

Certified Foreign Exchange Professional

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Certified Certified Certified Certified Foreign ExchangeForeign ExchangeForeign ExchangeForeign Exchange ProfessionalProfessionalProfessionalProfessional

Certificate Code VSCertificate Code VSCertificate Code VSCertificate Code VS----1001100110011001

Vskills certification in foreign exchange introduces candidates to various aspects of the

largest financial market in the world, trading, bank's foreign exchange and treasury

department, risk management, macroeconomic parameters and practical aspects of foreign

exchange markets. A Vskills Certified foreign exchange professional finds employment in

various retail banks, investment banks, research firms, and treasury departments of various

MNCs.

Why should one take this certification?Why should one take this certification?Why should one take this certification?Why should one take this certification?

To demonstrate clear understanding of foreign exchange and practical aspects of foreign

exchange markets and to get a visible recognition for this knowledge

Who will benefit from takingWho will benefit from takingWho will benefit from takingWho will benefit from taking this certification?this certification?this certification?this certification?

Students looking to find employment in treasury departments of bank trading foreign

exchange, research departments of banks and corporate treasuries, teachers of finance,

managers of companies who wish to understand foreign exchange, owners of small and

medium export import firms who want to have a better control over their foreign exchange

exposure and anyone having interest in the Foreign Exchange Markets.

Test Details:Test Details:Test Details:Test Details:

• Duration:Duration:Duration:Duration: 60 minutes

• No. of questions:No. of questions:No. of questions:No. of questions: 50

• Maximum marks:Maximum marks:Maximum marks:Maximum marks: 50, Passing marks: 25 (50%); There is no negative marking in

this module.

Fee Structure:Fee Structure:Fee Structure:Fee Structure:

Rs. 2,000/- (Includes all taxes)

Companies that hire Vskills Certified Foreign Exchange ProfessionalsCompanies that hire Vskills Certified Foreign Exchange ProfessionalsCompanies that hire Vskills Certified Foreign Exchange ProfessionalsCompanies that hire Vskills Certified Foreign Exchange Professionals

Vskills Certified Foreign Exchange Professionals might find employment in banks dealing

in currency trading and research, retail banks dealing with NRI customers for their foreign

exchange deposits and currency exchange firms. There is an employment scope in the

corporate treasuries of big companies as well to manage the foreign exchange risk

exposure.


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Table of Content

IntroductionIntroductionIntroductionIntroduction

� What is Foreign Exchange

� Why is foreign exchange important to us?

� What is a foreign Exchange market?

� Foreign Exchange as a Financial Market

� Foreign Exchange is an OTC Market (Over The Counter)

� Market Participants

History of Foreign ExchangeHistory of Foreign ExchangeHistory of Foreign ExchangeHistory of Foreign Exchange

� Gold Standard

� Main Stages of Recent Foreign Exchange Development

� Important landmarks of Currency Markets

Foreign Exchange BasicsForeign Exchange BasicsForeign Exchange BasicsForeign Exchange Basics

� Rates of Exchange

� Primary and Counter Currency

� Market Maker and Market Taker

� Bid/Offer Rate

� Middle Rate

� Cross Rates

� Factors affecting exchange rate fluctuations

� Supply and demand

� The Balance of Payments

� Confidence and speculation

� Central bank intervention

� Exchange Control

� Interest rate differentials

� Leads and Lags

� Hot Money

� Major Currencies

� Fixed, Floating and Dirty Float

� Trading Terminology


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Foreign Exchange RiskForeign Exchange RiskForeign Exchange RiskForeign Exchange Risk

� Effect of fluctuations in exchange rates: exposure and foreign exchange risk

� Exchange Rate Risk

� Interest Rate Risk

� Credit Risk

� Country Risk

� How to manage your risk

Kinds of Foreign Exchange MarketKinds of Foreign Exchange MarketKinds of Foreign Exchange MarketKinds of Foreign Exchange Market

� Spot Market

� Forwards Market

� Currency Forward Swaps

� Futures Market

� Strategies using Currency Futures

� Hedging using Currency Futures

� Speculation in Currency Futures

� Currency Options

Currency marketsCurrency marketsCurrency marketsCurrency markets in Indiain Indiain Indiain India

� Product Specification

� Uses of Currency Futures at NSE

� Membership

� Clearing, Settlement and Risk Management

Fundamental AnalysisFundamental AnalysisFundamental AnalysisFundamental Analysis

� Economic Fundamentals: Theories of Exchange Rate Determination

� Economic Indicators

� Financial and Sociopolitical Factors

Technical AnalysisTechnical AnalysisTechnical AnalysisTechnical Analysis

� The Fundamentals of Technical Analysis

� Types of charts

� Trends, Support and Resistance

� Trend Reversal Patterns

� Trend Continuation Patterns

� Gaps

� Fibonacci Analysis and Elliott Waves Theory

� The Elliott Waves


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TreasuryTreasuryTreasuryTreasury

� Role of Treasury

� Front Office

� Back Office

� Credit Control

� Investment Bank

� Largest Full Service Investment Banks that hire Foreign Exchange Traders and

Analysts


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Course OutlineCourse OutlineCourse OutlineCourse Outline

IntroductionIntroductionIntroductionIntroduction

� Explains the concept of Foreign Exchange

� Explains the importance of foreign exchange and describes how foreign exchange

facilitates transaction between entities in separate countries.

� Explains what a foreign Exchange market is and the functioning of the foreign

exchange market

� Describes the feature that makes foreign Exchange market different from other

financial markets and discusses the reason for participation in Foreign exchange

market.

� Explains the reason behind foreign exchange being treated as an OTC Market

(Over the Counter) and explains the various factors that influence the speculators

growth on volume.

� Explains the level of participation in the foreign exchange market and elaborates

the participation of central bank in the foreign exchange market

� Describes the role played by entities in the foreign exchange market such as banks,

such as banks, inter-bank broker, commercial companies, investment management

firms, retail foreign exchange brokers, non-bank foreign exchange company etc.

History of Foreign ExchangeHistory of Foreign ExchangeHistory of Foreign ExchangeHistory of Foreign Exchange

� Understand the working of gold standard system facilitating the conversion of

currency into gold at a fixed rate and explains the theories behind the collapse of

the gold standard system.

� Explains the main stages in the development of the foreign exchange system i.e.,

from Bretton Woods system to the development of Euromarkets.

� Explains the important landmarks of Currency Markets

Foreign Exchange BasicsForeign Exchange BasicsForeign Exchange BasicsForeign Exchange Basics

� Provides details on the exchange rate of currencies in foreign exchange dealing

� Explains the concepts of pricing of currency in terms of Primary and Counter

Currency

� Understand the process of quotation of currency involving two parties market

maker and market taker

� Explains the concept of Bid/Offer Rate

� Understand the purpose of middle rate and Cross Rates


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� Understanding the reasons for exchange rate fluctuation and the factors affecting

these fluctuations.

� Explains the factors affecting demand and supply and the inverse relation between

them.

� Explains the concept of Balance of Payments

� Understand the relation between confidence of a dealer in the future positioning

and speculation in a currency.

� Explains the need for intervention by the Central bank.

� Explains Exchange control and the factors affecting the exchange rates

� Explains the concept of Interest rate differentials and the momentum of payment

in terms of leads and lags

� Understand the concept of hot money in terms of availability of international

money at a given point of time.

� Explains the major currencies being exchanged in the foreign exchange market

such as US Dollars, Euro, Japanese yen, British Pound, Swiss Franc, Canadian

Dollar and Australian Dollar.

� Understand the methods employed by government to determine the value of the

domestic currency in terms of other currencies by the method of fixed, floating and

dirty Float

� Understanding the trading terminologies used when trading in the foreign exchange

market.

Foreign Exchange RiskForeign Exchange RiskForeign Exchange RiskForeign Exchange Risk

� Explains the effect of fluctuations in exchange rates and exposure to foreign

exchange risk on exporters and importers.

� Understand the consequences of exchange rate risk due to continuous shift in the

worldwide market demand and supply and explains the type of position limits

(Daylight and Overnight)

� Explains the interest rate risk pertinent to currency swaps, forward outright, futures

and options.

� Explains the meaning and forms of Credit Risk.

� Describes the intervention of government in the foreign exchange market causing

Country Risk

� Understanding the management of risk by technical analysis (also called charting) to

evaluate both risk and reward associated in trading.

Kinds of Foreign Exchange MarketKinds of Foreign Exchange MarketKinds of Foreign Exchange MarketKinds of Foreign Exchange Market

� Explains the procedure of trading in Spot Market and the reasons for the

popularity of currency spot trading.

� Explains the concept of forward exchange contracts, disadvantages of forward

contracts and the procedure for calculating fixed forward rates in Forwards Market.


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� Describes the process of determination of forward rates by means of currency

interest rates and forward points.

� Explains the principle of Currency Forward Swaps, the types of currency swaps and its

main uses.

� Understand the working of currency futures in the Futures Market, features of

currency swaps and difference between futures and forward contracts.

� Explains the interest rate parity theory and the procedure of pricing of future

contracts.

� Illustrating the strategies using currency futures

� Describes the procedure of hedging in currency market through two positions

short-hedge and long-hedge.

� Explains the speculation in currency futures when anticipating differences in spot

price and the prevailing future prices.

� Understanding the functioning of Currency Options and the major factors that have

an impact on the option prices.

� Explains the process of measurement of the impact of the currency prices on the

options premium in terms of Delta, Gamma, Vega and Theta.

Currency markets in IndiaCurrency markets in IndiaCurrency markets in IndiaCurrency markets in India

� Explains the Product Specification (futures) in terms of underlying currency future

contracts, trading hours, size of the contract, quotation, tenor of the contract,

available contracts, mechanism for settlement and the final settlement day

� Describes the specifications of the contract, specifies the permitted lot size, tick

size, quantity freeze, base price.

� Explains the procedure of price dissemination, setting of price ranges of contract to

avoid erroneous order entry.

� Explains the trading system at NSE (NEAT), order condition, time related

condition and pricing conditions laid down.

� Explains trading underlying versus trading futures.

� Describes the procedure of hedging at times of speculation, arbitrage strategies used

for tapping the price-differentials in two or more market.

� Explains the different types of members admitted in the currency derivative

segments such as online trading members of NSE, both trading members of NSE

and clearing members of NSCCL, professional clearing members of NSCCL

� Describes about the participants, eligibility criteria for membership of an individual,

partnership firms and corporate.

� Provides the eligibility criteria of professional clearing members (PCM).

� Explains the entities involved in clearing procedure, position limits, margins, mode

of payment settlement of contracts


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Fundamental AnalysisFundamental AnalysisFundamental AnalysisFundamental Analysis

� Understanding the Economic Fundamentals for determining the theories of

exchange rate with the help of concepts such as purchasing power parity and theory

of elasticity.

� Explains the Portfolio-Balance approach and the synthesis of traditional & modern

monitory views.

� Explains the various economic Indicators such as GNP, GDP, consumption

spending, Government spending, investment spending, net trading, capacity

utilization etc.

� Explains about various inflation indicators and their measurement using economic

tools such as Producer Price Index (PPI), Consumer Price Index (CPI), GNP

deflators, GDP deflators, Employment Cost Index (ECI), CRB Index, and Journal

of commerce Industrial price index (JoC).

� Explains the role of financial and Sociopolitical Factors and describes the political

events and crisis in the trading system.

Technical AnalysisTechnical AnalysisTechnical AnalysisTechnical Analysis

� Explains the Fundamental principles of Technical Analysis based on DOW

Theory

� Understanding the different types of charts used for representation.

� Explains about different trends representing the market movement, trend line and

describes about the lines of support and resistance.

� Explains about the trend reversal patterns and trend continuation patterns

� Understanding of the Mathematical Modeling Methods (Indicators).

� Explains the Fabonacci Analysis and Elliot Waves theory.

TreasuryTreasuryTreasuryTreasury

� Explains the role and responsibilities of treasury

� Explains the main activities performed by Investment banks and other venture in

which investment bank operations can be integrated.

� Understanding the procedure involved in managing Front-Office, Middle-Office

and Back-Office operations.


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Sample QuestionsSample QuestionsSample QuestionsSample Questions

1. An appreciation1. An appreciation1. An appreciation1. An appreciation of the Rupee relative to the US Dollar would be expected to of the Rupee relative to the US Dollar would be expected to of the Rupee relative to the US Dollar would be expected to of the Rupee relative to the US Dollar would be expected to

have which of the following effects?have which of the following effects?have which of the following effects?have which of the following effects?

A. Increase US exports to India

B. Increase US imports from India

C. Raise the cost to Americans for Indian imports

D. Create Balance of Payments surplus for India

2. Which of the systems occurred first in the history of international 2. Which of the systems occurred first in the history of international 2. Which of the systems occurred first in the history of international 2. Which of the systems occurred first in the history of international bbbbanking ?anking ?anking ?anking ?

A. Post Bretton Woods

B. European Monetary Union

C. Gold Standard

D. Gold Exchange Standard

3. When Americans or foreigners expect the return on _____ deposits to be hi3. When Americans or foreigners expect the return on _____ deposits to be hi3. When Americans or foreigners expect the return on _____ deposits to be hi3. When Americans or foreigners expect the return on _____ deposits to be highghghgh

relative to the return on _____ deposits, there is a higher demand for dollar relative to the return on _____ deposits, there is a higher demand for dollar relative to the return on _____ deposits, there is a higher demand for dollar relative to the return on _____ deposits, there is a higher demand for dollar

depositsdepositsdepositsdeposits and a correspondingly lower demand for foreign depositsand a correspondingly lower demand for foreign depositsand a correspondingly lower demand for foreign depositsand a correspondingly lower demand for foreign deposits

A. dollar; dollar

B. dollar; foreign

C. foreign; dollar

D. foreign; foreign

4. If the French demand for Americ4. If the French demand for Americ4. If the French demand for Americ4. If the French demand for American exports rises at the same time that U.S.an exports rises at the same time that U.S.an exports rises at the same time that U.S.an exports rises at the same time that U.S.

productivity rises relative to French productivity, then, in the long run,productivity rises relative to French productivity, then, in the long run,productivity rises relative to French productivity, then, in the long run,productivity rises relative to French productivity, then, in the long run,

A. the euro should appreciate relative to the dollar

B. the dollar should depreciate relative to the euro

C. the dollar should appreciate relative to the euro

D. it is not clear whether the euro should appreciate or depreciate relative

to the dollar.

5. If portable disk players made in China are imported into the United States, the 5. If portable disk players made in China are imported into the United States, the 5. If portable disk players made in China are imported into the United States, the 5. If portable disk players made in China are imported into the United States, the

Chinese manufacturer is paid inChinese manufacturer is paid inChinese manufacturer is paid inChinese manufacturer is paid in

A. Dollars

B. Chinese Yuan

C. Euros or some third currency

D. International monetary credits

Answer: 1 (C), 2 (C), 3 (B), 4 (C), 5 (B)Answer: 1 (C), 2 (C), 3 (B), 4 (C), 5 (B)Answer: 1 (C), 2 (C), 3 (B), 4 (C), 5 (B)Answer: 1 (C), 2 (C), 3 (B), 4 (C), 5 (B)

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