Foreign Exchange Markets (FRM Part 1 2023 - Book 3 - Chapter 9)
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- čas přidán 20. 07. 2024
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After completing this reading, you should be able to:
- Explain ad describe the mechanics of spot quotes, forward quotes and future quotes in the foreign exchange market and distinguish between the bid and ask exchange rates
- Calculate bid-ask spread and explain why bid-ask spread for spot quotes may be different from the bid-ask spread for the forward quotes
- Compare outright (forward) and swap transactions
- Define, compare and contrast transaction risk, translation risk and economic risk
- Describe the examples of the transaction, translation, and economic risk and explain how to hedge these risks.
- Describe the rationale for multi-currency hedging using options
- Identify and explain the factors that determine the exchange rates
- Calculate and explain the effect of an appreciation/depreciation of a currency of a currency relative to a foreign currency,
- Explain the purchasing power parity theorem and use this theorem to calculate the appreciation or depreciation of a foreign currency
- Explain how no-arbitrage assumption in the foreign exchange markets leads to the interest rate parity theorem and use this theorem to calculate forward foreign exchange rates.
- Distinguish between covered and uncovered interest rate parity conditions.
CME quotes are standardized so USD is always the QUOTED currency, not base currency
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is the 2020 part 1 syllabus largely different from the november 2019 one?
can i still use the november 2019 books to prepare for the may 2020 exam?
Yes, Books 1 & 2 have big changes and Books 3 and 4 have fewer changes. I would recommend against studying with the 2019 content for the 2020 exam. You can find updated study notes, video lessons, and question banks at analystprep.com/frm/
I struggle to understand on the 35th minutes of this video that when the risk free rate is lower than the foreign risk free rate then the foreign currency should decrease. For me if the foreign risk free rate increases then it attracts investors therefore the foreign currency increases due to higher demand for this high free rate foreign currency. Anyone can explain?
Is there a lot of difference between 2019 book and 2020 book??
Yes, mostly in Books 1 & 2. Books 3 and 4 have fewer changes.
Same ques as above