FX & Money Markets

Euromoney Learning Solutions

How long?

  • 3 days
  • in person

Euromoney Learning Solutions


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About the course

Learn the fundamentals of money & FX markets

Foreign Exchange (FX) and Money Markets course provides a firm grounding in the instruments and activities of the international money and FX markets, sweeping away the confusion that can be created by the scale, speed and apparent diversity of the markets.

The foreign exchange and money markets are worth trillions of dollars and are the pivot of the financial markets, providing funding, investment opportunities and the conduit between all other financial markets. In recent years, the importance of the money markets has become even greater as financial institutions focus more closely on the management and diversification of their sources of liquidity, apply greater discipline to their funding and examine the attractions of short term investment and trading strategies.

This course focuses on the current profile of the markets and offers up-to-date insights. The course also emphasises the integrated nature of the market - in particular, how different instruments perform the same or similar functions and the opportunities this provides for arbitrage and hedging. It also analyses the liquidity characteristics and risks of different instruments and funding strategies.

Summary of course content

  • The FX and money markets and its participants
  • The impact of Central Banks
  • Money market products
  • FX products
  • Risk management issues


This course is an intermediate programme taught with highly interactive and intensive group exercises and case studies.


Day 1: The Cash Money Market


  • What the money market does: liquidity and risk management
  • Distinguishing the money and capital markets
  • Primary & secondary characteristics
  • What drives rates of return
  • The role of the Central Bank and monetary policy
  • The depo market and the role of LIBOR & Euribor How Libor is calculated; The shortcomings in Libor exposed by the 2008 Financial Crisis; Market conventions and calculations; How is the overnight market different?
  • Overnight rates & indices (e.g. EONIA®; Fed funds rate)

Exercise: Libor computations

Traditional Cash Instruments

  • Types of instruments: Discount v interest bearing; Secured v unsecured borrowing and lending
  • The concept of “marketable” securities
  • The Treasury Bill Market T-Bills as a source of government funding and monetary policy; Quotation of US & UK T-Bills
  • The Certificate of Deposit (CD) market Who issues and why?; Understanding the cash flows; Calculating a holding period return; Market regulation following the Financial Crisis
  • The Commercial Paper (CP) market US & Euro Commercial Paper; Quotation methodologies; Calculations; Why use CP issuance programmes
  • The quoted discount rate v the true effective rate
  • Other common discounted paper Bills of Exchange
  • Credit, liquidity and other drivers

Exercise: Calculating holding period returns

Day 2: Securitised Funding


  • The fundamentals of repo markets
  • Importance of the market following the financial crisis
  • What collateral is eligible? General (GC) and specific (SC) collateral; rights of substitution
  • The mechanics of repo agreements Cash v security driven transactions; Repo v reverse repo
  • Comparison of alternative repo mechanisms Classic repo v buy/sell-back; Securities lending; Basic repo mathematics: Price and interest calculations
  • Identifying and managing the risks in repo transactions: Credit & liquidity exposure on repo; Collateral management
  • Margin ‘haircut ’ agreements
  • Custody of collateral: Bilateral, hold in custody (HIC), tri-party repo structures

Case study: Calculating the cash flows on a standard repo transaction

Uses & Applications of Repo

  • Funding trading positions with repo; advantages and constraints
  • Short selling
  • Matched book trading
  • Yield enhancement trades:
  • Riding the yield curve
  • “Figuring the tail”
  • Understanding the “bet”

Case study: “Figuring the tail” in a yield curve trade

Day 3: The FX Market

The Spot FX Market

  • Market organization
  • Quoting spot FX rates Indirect v direct quotes; Market conventions; Reciprocal rates
  • Calculating the cross rate
  • Managing and monitoring the FX spot book: Position keeping

Case study:

  • Calculating cross rates
  • Managing a spot book

The Forward FX Market

  • Calculating the outright forward rate and forward points Value dates; Understanding where the forward rate comes from Premium v discount
  • The FX swap market and how swap rates are calculated Why banks use forward swaps rather than outright forwards: hedging outright forward transactions; Understanding the sensitivity of FX swaps to changes in rates; “Historic rate” rollovers explained
  • Using FX swaps for funding purposes
  • Short dates; Introducing the terms; Calculating an FX swap over today and tom Calculations
  • Marking-to-market outright forwards and FX swaps
  • Forward-forward transactions
  • Time options explained with calculations
  • Non-deliverable forwards (NDF’s)

Case study: Calculating forward points; marking-to-market an outright forward; using time options

Session Three: Risks in Foreign Exchange

  • Credit risk and “market replacement”
  • Delivery (Herstatt) risk
  • Credit mitigation techniques: Netting; Continuous linked settlement (CLS)

End of Course


Paul Kitching

The Course Director was the Strategic Development Manager at the London International Financial Futures Exchange (LIFFE), where he was responsible for the research and definition of new specialist swap and risk transfer contracts. Prior to this, he was Head of Interest Rate Product Development wi...

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FX & Money Markets at Euromoney Learning Solutions

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