Instructional Video: Foreign Exchange Markets

Topic Progress:

Saunders, Chapter 13, Foreign Exchange Risk is a 29-minute instructional video analyzing the following concepts:

* Calculate a financial institution’s overall foreign exchange exposure.
* Explain how a financial institution could alter its net position exposure to reduce foreign exchange risk.
* Calculate a financial institution’s potential dollar gain or loss exposure to a particular currency.
* Identify and describe the different types of foreign exchange trading activities.
* Identify the sources of foreign exchange trading gains and losses.
* Calculate the potential gain or loss from a foreign currency denominated investment.
* Explain balance‐sheet hedging with forwards.
* Describe how a non‐arbitrage assumption in the foreign exchange markets leads to the interest rate parity theorem; use this theorem to calculate forward foreign exchange rates.
* Explain why diversification in multicurrency asset‐liability positions could reduce portfolio risk.
* Describe the relationship between nominal and real interest rates.

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