Forward exchange contracts are commonly used as hedging instruments, assisting companies to mitigate the foreign exchange risks inherent in their operational activities. The practical implementation of these within a hedging policy requires one to have insights into:
Appreciate the FEC’s function as a hedging tool, both the pros and the cons.
Achieve a solid understanding of the pricing components of an FEC.
Understand the mark to market (valuation) impacts of this derivative.
Address the cash flow implications of early deliveries and extensions (FX swaps).
Application of the learned concepts in a practical manner
Some "Need-to-knows"
Welcome and Learning Outcomes 💡
Introduction to Hedging
Formulating a Hedging Policy
Common Concerns About the Concept of Hedging
The Value of Hedging
Jargon Buster
Summary Slides
Test Your Knowledge
Defining the Derivative Landscape
Forward Pricing Mechanics
Forward Pricing - Importer Example
Forward Pricing - Exporter Example
Forward Pricing Summary
Jargon Buster
Test Your Knowledge
Defining the FX Swap Landscape
Why use a FX Swap?
Importer Extension Scenarios
Importer Early Delivery Scenarios
Exporter Extension Scenarios
Exporter Early Delivery Scenarios
Timing Mismatches and FX Swaps
FX Swaps... Food for Thought
Jargon Buster
Test Your Knowledge
Transacting at spot
Hedging with a FEC - Part 1
Hedging with a FEC - Part 2
Summary Slides
Transacting at Spot
Hedging with a FEC - Part 1
Hedging with a FEC - Part 2
Summary Slides
