July 2023 Newsletter Summer FX Learning Sessions: Explore our July newsletter and discover the latest blog posts and insights from FX Initiative. We help finance, accounting, treasury, and sales professionals stay up to date with new training content, CPE webinars, and helpful tips & resources. Get started with our foreign exchange risk management training, which provides 24/7 365 access to our complete suite of foreign exchange (FX) continuing professional education (CPE), examples and events at FXCPE.com. Start Training > View Newsletter July 2, 2023By FX Initiative General accounting, business, collars, corporate, CPE, cross border, currency, derivatives, development, economics, education, ethics, expenses, finance, forex, forwards, fxcpe, fxinitiative, global, hedging, initiative, international, learning, management, options, payments, pricing, professional, rates, revenue, risk, trading, training, transactions, treasury 0 0 Comment
FX Global Code Compliance Complying with the FX Global Code: The FX Global Code explains the set of global principles of good practice in the foreign exchange (FX) market, and was introduced by the Bank for International Settlements (BIS) Markets Committee in May 2017. To date, over 500 market participants have signed Statements of Commitment to the FX Global Code. The FX Global Code aligns with the foreign exchange (FX) risk management best practices FX Initiative teaches to FX market participants, including FX sales teams and treasury professionals. The goal of the FX Global Code is to promote fairness in FX trading, and FX Initiative encourages our audience to learn about and benefit from the code. Download the FX Global Code PDF Ready to learn more about FX risk management best practices? Start your FX risk management training today, which provides 24/7 365 access to our complete suite of foreign exchange (FX) continuing professional education (CPE), examples & events at FXCPE.com. Start FX Training September 20, 2022By FX Initiative General, Webinar accounting, best, business, cashflows, code, CPE, currency, derivatives, development, economics, ethics, finance, fxcpe, fxinitiative, global, hedging, international, management, practices, pricing, professional, risk, technology, trading, training, treasury 0 0 Comment
August 2021 Newsletter August FX Analyses: Explore our newsletter and discover the latest blog posts and insights from FX Initiative. We help finance, accounting, treasury, and sales professionals stay up to date with new training content, CPE webinars, and helpful tips & resources. Get started with our foreign exchange risk management training, which provides 24/7 365 access to our complete suite of foreign exchange (FX) continuing professional education (CPE), examples and events at FXCPE.com. Start Training > View Newsletter August 3, 2021By FX Initiative General accounting, balance, booking, CPE, currency, development, earnings, economics, education, EPS, events, examples, exchange, finance, financial, foreign, forex, fxcpe, fxinitiative, hedging, income, insights, instruments, learning, management, newsletter, pricing, professional, rates, risk, sheet, statement, statements, training, treasury, updates, videos 0 0 Comment
Features of FX Forward Contracts Features of FX Forward Contracts (Video): Find out the distinctive features of foreign exchange (FX) forward contracts and discover how they can be used to hedge FX risk. This video is a preview of FX Initiative’s FX Spot & Derivatives course as part of Learning Objective #1. To learn more, start your FX risk management training today, which provides 24/7 365 access to our complete suite of foreign exchange (FX) continuing professional education (CPE), examples & events at FXCPE.com. Start FX Training April 27, 2021By FX Initiative FX Spot & Derivatives, General accounting, contract, currency, derivative, discount, education, EPS, example, expenses, finance, forward, fxcpe, fxinitiative, gain, hedge, interest, learning, long, loss, management, maturity, option, payables, premium, pricing, rates, receivables, revenues, risk, short, training, treasury 0 0 Comment
FX Strategy Simulation - Option Contracts FX Strategy Simulation - Option Contracts: To illustrate the concept of option contracts, this FX strategy simulation uses the Foreign Exchange Derivative Speculator to model the economic and accounting aspects of a put and a call option. These examples demonstrate the economics and accounting of option contracts, and show how variables such as the option strike rate and implied volatility impact the premium or cost of the option at inception. Additionally, the asymmetrical payoff profile of an option is highlighted using the economic chart, and the accounting is clarified using journal entries and t-accounts. From a cash flow perspective, emphasis is placed on the fact that options can finish "in the money" where a cash payment is received at maturity, or "out of the money" with a zero fair value where no further payment is required to settle the contract. Overall, the three key distinguishing characteristics of vanilla option contracts, compared to forwards and option combinations, are (1) that a premium is paid upfront, (2) there is an asymmetrical payoff profile relative to the spot foreign exchange rate, and (3) there is no obligation to make a payment at maturity. For additional information and examples, explore our on-demand self-study CPE course titled FX Spot & Derivatives. To learn more, start your FX risk management training today, which provides 24/7 365 access to our complete suite of foreign exchange (FX) continuing professional education (CPE), examples & events at FXCPE.com. Start FX Training March 31, 2020By FX Initiative Examples, FX Derivative Speculator accounting, call, contract, CPE, currency, derivative, economics, education, example, finance, forex, fxcpe, fxinitiative, gain, hedging, inthemoney, learning, loss, management, option, outofthemoney, premium, pricing, put, rate, risk, simulation, strategy, strike, training, treasury, vanilla, volatility 0 0 Comment
FX Strategy Simulation: Forward Contract FX Strategy Simulation - Forward Contract: To put the concept of a forward contract into practice, this foreign exchange (FX) strategy simulation uses the FX Derivative Speculator to demonstrate the economics and accounting of a foreign currency forward contract using the default accounting treatment to help reinforce the following two points: The functional currency value of the forward at any point in time is equivalent to the difference between the forward rate on the contract and the then prevailing forward rate in the market. The interest rate differential between the two currencies in the pair determines the forward point premium or discount applied to the spot rate to compute the "all in" forward rate. To learn more, start your FX risk management training today, which provides 24/7 365 access to our complete suite of foreign exchange (FX) continuing professional education (CPE), examples & events at FXCPE.com. Start FX Training February 11, 2020By FX Initiative Examples, FX Derivative Speculator, FX Spot & Derivatives accounting, CPE, currency, derivative, discount, economics, education, example, finance, forward, FXCPE, fxinitiative, gain, hedging, learning, loss, management, premium, pricing, rate, risk, simulation, strategy, training, treasury 0 0 Comment
November 2019 Newsletter Explore our November newsletter and discover the latest blog posts and insights from FX Initiative. We help finance, accounting, treasury, and sales professionals stay up to date with new training content, CPE webinars, and helpful tips & resources. Get started with our foreign exchange risk management training, which provides 24/7 365 access to our complete suite of foreign exchange (FX) continuing professional education (CPE), examples and events at FXCPE.com. Start Training > View Newsletter November 5, 2019By FX Initiative General accounting, balancesheet, booking, centralization, CPE, currency, development, economics, education, examples, finance, financial, foreignexchange, hedging, incomestatement, insights, learning, management, newsletter, pricing, professional, rates, risk, statements, training, treasury, updates, videos 0 0 Comment
FX Pricing & Booking Best Practices (Video) FX Pricing & Booking Best Practices (Video): Explore how multinational corporations can retain and reduce FX risk by pricing and booking FX transactions strategically. This video is a preview of FX Initiative’s FX Risk Management course as part of Learning Objective #1. To learn more, start your FX risk management training today, which provides 24/7 365 access to our complete suite of foreign exchange (FX) continuing professional education (CPE), examples & events at FXCPE.com. Start FX Training July 16, 2019By FX Initiative FX Risk Management, General accounting, average, booking, convention, CPE, currency, daily, derivative, example, exchange, finance, fxcpe, fxinitiative, gain, hedge, learning, loss, management, pricing, rate, reduce, retain, risk, training, treasury 0 0 Comment
Features of FX Forward Contracts (Video) Features of FX Forward Contracts (Video): Find out the distinctive features of foreign exchange (FX) forward contracts and discover how they can be used to hedge FX risk. This video is a preview of FX Initiative’s FX Spot & Derivatives course as part of Learning Objective #1. To learn more, start your FX risk management training today, which provides 24/7 365 access to our complete suite of foreign exchange (FX) continuing professional education (CPE), examples & events at FXCPE.com. Start FX Training June 25, 2019By FX Initiative FX Spot & Derivatives, General, Webinar accounting, collar, contract, corporation, CPE, currency, demonstration, derviatives, discount, earnings, education, EPS, example, expense, expiry, finance, forward, fxcpe, fxinitiative, gain, hedge, interest, international, learning, long, loss, management, maturity, option, payable, premium, pricing, rates, receivable, revenue, risk, short, simulation, time, training, treasury 0 0 Comment
Find Out the 4 Ways Firms Manage FX Risk Operationally, foreign exchange risk can be managed in four ways: (1) Avoided, (2) Transferred, (3) Retained and (4) Reduced. Each of these four methods can be applied individually or collectively, and there is no standard protocol on which approach to use when conducting international business. Therefore, companies can benefit from defining and exploring examples of how each approach works in practice as follows: First, avoiding foreign exchange risk refers to engaging only in domestic business opportunities where both parties to every transaction use the same functional currency. For example, a company based in the United States that uses the U.S. dollar (USD) as their functional currency would only conduct business with counterparties that also use the U.S. dollar as their functional currency. As a result, neither party to the transaction is exposed to foreign exchange risk, but this approach severly limits business opportunities internationally. Second, transferring foreign exchange risk refers to pricing transactions in the company’s functional currency rather than the customer’s local currency or through risk sharing agreements where a portion of the risk is shared. For example, a company based in the United Kingdom that sells to American consumers could price their goods and services in British pound sterling (GBP). In turn, the foreign exchange risk is transferred to the consumer, but this approach creates a barrier to closing sales in the United States since customers must first acquire GBP to make a purchase. Third, retaining foreign exchange risk refers to accepting the risk associated with foreign exchange transactions and bearing the potential volatility that accompanies market fluctuations. For example, a Canadian company that does business in the United States where transactions are denominated in U.S. dollars is exposed to exchange rate fluctuations. Consequently, the amount of Canadian dollars (CAD) required for the company to settle a transaction varies, which can create uncertainty and volatility in earnings and cash flows. Fourth, reducing foreign exchange risk refers to structuring deals strategically through deliberately denominating transactions in a particular currency and hedging the associated foreign exchange risk. For example, a Japanese company that sells automobiles to the United States that are denominated in U.S. dollars can enter into a currency derivative to hedge the U.S. dollar (USD) / Japanese yen (JPY) exchange rate. Accordingly, this approach ensures that the amount of JPY required to settle a future transaction is predictable and certain. Overall, world-class foreign exchange risk management involves a combination of risk retention and reduction. Risk retention involves controlling the risk and accepting the gain or loss, and risk reduction involves mitigating the risk to an acceptable level by understanding when and how to hedge using financial instruments. FX Initiative’s currency risk management training outlines best practices related to risk retention and risk reduction techniques, including easy to follow guidelines for pricing and booking transactions. Which approaches to managing foreign exchange risk does your global business employ? Our foreign exchange risk management training can help you optimize several important aspects of your program such as accounting booking rate conventions, exchange rate sources, and currency denomination parameters. Start the new quarter with an actionable plan for managing foreign exchange risk by taking the FX Initiative today! Ready to retain and reduce your FX risk exposures? Click here to get started! Cheers, The FX Initiative Team support@fxinitiative.com January 15, 2018By FX Initiative FX Risk Management, General Avoid, Best Practices, Booking, Continuing Professional Education, Management, Pricing, Reduce, Retain, Risk, Transfer, CPE, Foreign Exchange 0 0 Comment