Foreign Exchange Markets

Objectives

The main objective of this Learning Unit is to analyze the fundamentals of foreign exchange markets, understand their functioning and examine some of the agents operating in these markets. We will also look at different methods of managing exchange risk. Forward exchange contracts and currency options will be examined in greater detail.

Learning Unit Summary

In many cases export companies must facilitate finance for their clients mainly due to the requirements of the market. In a foreign exchange market dealers trade in currencies.

Exports of goods and services, foreign investments, foreign loans, etc. form currency supply whereas currency demand is formed by imports, investment abroad and other factors. These operations stimulate the buying and selling of currencies in a market governed by supply and demand. If payment for a service provided or goods delivered to a foreign client is in a currency other than in which the exporter usually operates, the exporter is exposed to the risk of exchange rate fluctuation.

Course Contents

 

  • Introduction
  • Foreign Exchange Markets
  • Forward Exchange Contract
  • Currency Options
  • Balance of Payments

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