Vskills Certified Foreign Exchange Professional

1. Certified Foreign Exchange
Professional

2. Certified Foreign Exchange Professional
Certified Foreign Exchange Professional
VS-
Certificate Code VS-1001
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?
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 taking 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:
• Duration: 60 minutes
• No. of questions: 50
• Maximum marks: 50, Passing marks: 25 (50%); There is no negative marking in
this module.
Fee Structure:
Rs. 2,000/- (Includes all taxes)
Companies 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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3. Certified Foreign Exchange Professional
Table of Content
Introduction
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 Exchange
Gold Standard
Main Stages of Recent Foreign Exchange Development
Important landmarks of Currency Markets
Foreign 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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4. Certified Foreign Exchange Professional
Foreign 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 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 markets in India
Product Specification
Uses of Currency Futures at NSE
Membership
Clearing, Settlement and Risk Management
Fundamental Analysis
Economic Fundamentals: Theories of Exchange Rate Determination
Economic Indicators
Financial and Sociopolitical Factors
Technical 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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5. Certified Foreign Exchange Professional
Treasury
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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6. Certified Foreign Exchange Professional
Course Outline
Introduction
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 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 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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7. Certified Foreign Exchange Professional
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 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 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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8. Certified Foreign Exchange Professional
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 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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9. Certified Foreign Exchange Professional
Fundamental 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 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.
Treasury
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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10. Certified Foreign Exchange Professional
Sample Questions
1. An appreciation of the Rupee relative to the US Dollar would be expected to
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 banking ?
A. Post Bretton Woods
B. European Monetary Union
C. Gold Standard
D. Gold Exchange Standard
high
3. When Americans or foreigners expect the return on _____ deposits to be high
relative to the return on _____ deposits, there is a higher demand for dollar
deposits and a correspondingly lower demand for foreign deposits
A. dollar; dollar
B. dollar; foreign
C. foreign; dollar
D. foreign; foreign
American
4. If the French demand for American exports rises at the same time that U.S.
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
Chinese 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)
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