Forex markets
•Transferir como PPTX, PDF•
1 gostou•544 visualizações
This presentation was prepared by my GMCS team during the GMCS 2 course at Mangalore Branch of SIRC of ICAI. This presentation gives an overview regarding the Forex Market and how one can use the Forex instruments and thus be able to transact globally. An approach to deal with Forex Instruments in order to have accurate decision making has been outlined. This approach explains as to how an investor may be able to use Purchase Power Parity and Interest Rate Parity Theorems in order to transact.
Recomendados
Mais conteúdo relacionado
Mais procurados
Mais procurados (20)
Semelhante a Forex markets
Semelhante a Forex markets (20)
Mais de Bharath Rao
Mais de Bharath Rao (19)
Último
Último (20)
Forex markets
- 3. OUTLINE Forex and Forex Markets Investments and Risk Management in Forex Market
- 5. WHY FOREIGN INVESTMENTS? To take advantage of economies of scale Foreign firms foster forward and backward economic linkages. Presence of foreign investors creates a multiplier effect Foreign investors are a boon to government to raise revenue and Employment Generation Maintain a proper balance amongst the factors of production by the supply of scarce resources The parent company enters into newer financial markets by its investments outside Develops closer political relationship between the home and the host country
- 6. RISKS (EXPOSURE) Transaction Risk •Measures the effect of an exchange rate on outstanding obligations Translation Risk •Refers to gains and losses caused by translation of Forex Assets and Liabilities into Home Currency Economic Risk •Extent to which the economic value of the company changes due to change in Forex Rates.
- 7. THE FOREX MARKET Forex Exchange Market • A Market for converting the currency of one country into the currency of another. Exchange Rate • The rate at which one currency is converted into another • Bid – Ask = Spread Types of Market • Over the Counter Market • Exchange Traded Market Uses of Market • To facilitate conversion of Currency • To Trade investments of Foreign currency • To manage Forex Exposure effectively
- 8. INSTRUMENTS IN THE FOREX MARKET Currency Forwards – OTC Loans - OTC Currency Swaps – OTC Currency Futures - Regulated Currency Exchange Traded Funds - Regulated Currency Options - Regulated
- 11. INVESTMENT AND DECISION MAKING IN THE FOREX MARKET
- 12. INVESTOR S APPROAC H TO FOREX RISK MANAGEM ENT Expected Payment/Receivable in FOREX Apply Purchasing Power Parity Theorem Expected Gain Hedge Using Futures or Forward Contract Expected Loss Apply Interest Rate Parity Theorem and obtain expected Forward Rate Hedge using Futures Hedge Using Forward Contract/Swaps High Risk Instrument = Options Low Risk and Investment Purpose = Exchange Traded Funds
- 13. PURCHASING POWER PARITY It is in the equilibrium the rate of change in exchange equals inflation rate differential. PPP expresses the idea that a bundle of goods in one country should cost the same in another country after exchange rates are taken into account.
- 14. DECISION MAKING USING PPP
- 15. INTEREST RATE PARITY Interest rate parity has to do with the idea that money should earn an equal rate of return. Uses nominal interest rates to analyze the relationship between spot rate and a corresponding forward rate
- 16. LEADING AND LAGGING Leads and lags is the alteration of settlement of forex transaction because of an expected change in exchange rates. Accelerating the transaction is known as "leads", while slowing it down is known as "lags". Leads will result when firms or individuals making payments expect an increase in the foreign-exchange rate, while lags arise when the exchange rate is expected to fall.
- 17. COMPLIANCE RBI Regulations •Pay/Receive Forex within Certain period •Maintain Separate NRI Account •Convert Forex to Home currency FEMA Regulations •Permitted Current Account Transactions •Permitted Capital Account Transactions •Person Resident in India/Person Resident outside India Income Tax Regulations •Complete and full disclosure of foreign assets and foreign interest in IT Returns •Transfer Pricing and Scrutiny Assessments
- 19. THE WORLD IS IN YOUR HANDS
- 20. FRIENDS TEAM MEMBERS Anusha Dharmaraj Dalen D’Souza Janardhan Gouda Jyothi Vidyashree Roopika Shetty Shinoj Isac Shravan Kumar Sneha Rao Bharath Rao Thank You
Notas do Editor
- The Investor being prudent in his dealings tries to forecast his gains or losses. The Investor shall first try to predict the spot price of the currency for a future date by using the purchase power parity theory. Inflation rates and its forecasted rates are available on various sites online. If the estimated spot price results in a financial advantage, the investor may not do anything at all or may secure it by hedging using Currency Futures or Forward Contracts. If the estimated spot price results in a financial disadvantage, the investor on a prudent note hedge himself. He can utilize the Interest Rate Parity theory and determine an estimated forward rate. He may hedge by instruments from the Exchange Market by investing in Futures. He may also end up entering into Forward Agreements or Currency Swaps by virtue of a OTC Deal. The investor may also decide his luck by investing in Currency Options. The Investor as a matter of general investment can invest in Exchange Traded Funds. An Exchange Traded funds is a Mutual Fund in Foreign Currency. The NAV changes as the Forex rate changes.