This CPE course begins with a discussion on understanding exchange rates, and outlines methods to forecast such figures. It discusses theories such as the purchasing power parity theory (PPPT), the interest rate parity theory (IRPT), and the International Fisher Effect. It examines the stages of financial risk management, and discusses several methods of managing exposure to currency risk. It explains external hedging, multilateral netting, currency forward contracts, money market hedges (MMH), currency futures, currency options, foreign exchange swaps, and provides case studies for each aspect of currency risk management.
▪ Recognize the effects of exchange rate theory and the impact of differential inflation rates on forecast exchange rates.
▪ Identify internal hedging techniques.
▪ Calculate components related to the more common instruments for managing currency risk: swaps, forward contracts, money market hedges, futures and options.
▪ Exchange rate theory and the impact of differential inflation rates on forecast exchange rates.
▪ Theory and forecasting of exchange rates (e.g. interest rate parity, purchasing power parity and the Fisher effect).
▪ Internal hedging techniques.
▪ Operation and features of the more common instruments for managing currency risk: swaps, forward contracts, money market hedges, futures and options.
▪ Black Scholes option pricing model variables.
CGMA exam candidates
Management accountants wanting to develop skills in governance and risk management
Management accounting experience or the equivalent.