Course outline: Understanding the Money Markets & FX

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Capital Markets & Derivatives Training specialise in developing and delivering bespoke in-house training courses and programmes. This sample course outlines the content and structure of a typical course.

Objective: This course is designed to provide delegates with a clear and simple explanation of the most common calculation techniques used in the financial markets and how they are applied in particular to swaps, repos, futures and options.
Course aims:
  • Explain the core Money Market and FX products
  • Understand how to calculate interest and price products
  • Understand the differences between interest rate instruments
  • Understand the different type of repos

Money Markets Instruments

This section explains the relationship between the value of money today and the value of money (cash flows) in the future

  • Money Markets Instruments
    • types of instruments: T-Bills; CD's; CP; BA's
    • discount versus interest bearing securities
    • short-dated bonds
    • who issues and why?
    • establishing a CP programme
    • fixed income derivatives: the bond futures contract
  • Calculating the net present value of a series of cash flows
    • discount factors and discount functions
  • Calculating interest
    • simple versus compound interest
    • nominal versus effective rates
    • day count conventions
    • annuities
    • interpolation and extrapolation of rates
  • Working out a spot FX rate
    • how a cross rate is determined
    • calculating a forward fx rate

Pricing Money Market Instruments

This section reviews the different interest rate instruments and how they are priced and valued using the simple techniques described earlier on.

  • Cash deposits, T-bills, bills of exchange, CD's, CP
    • FRA's, STIR futures
    • Bonds
    • Swaps
  • Applying PV and FV techniques to calculate swaps, bonds and STIR Futures
    • using discount factors and discount functions
    • boot strapping techniques for working out NPV

The Repo Market

This section provides an explanation of the different types of repos that can be traded, and how they are priced and settled on a bilateral or tri-party basis.

  • Market development and history - GMRA
  • Definition of repo types and legal agreement
  • Classic repo/sell buy back/collateral lending
  • Cross currency repos
  • Comparison of repo types
  • Quoting a repo price
  • Hold in custody
  • General collateral v special
  • Haircuts and types of margin settlement
  • Bilateral and tri-party settlement
  • Clearing House margining arrangements

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