FIN3120DFOREIGNEXCHANGETRADING

Semester1,2014/15(August2014November2014)
Instructor:AdjunctAssociateProfessorChewLoyCheow
Office:BIZ20213
Email:bizclc@nus.edu.sg
Classhours:5.008.00pm
Consultation:onrequest
Prerequisites:Finance(FIN2004)orequivalent,FinancialMarkets(FIN3103)

RecommendedTextbook
CheolS.Eun,BruceG.Resnick,andSanjivSabherwal.InternationalFinance.McGrawHill.6thedition,
GlobalEdition.
Frederic S. Mishkin, Kent Matthews & Massimo Giulodori, The Economics of Money, Banking and
FinancialMarkets,Pearson,10thedition,GlobalEdition.
JohnMurphyTechnicalAnalysisoftheFinancialMarkets,NewYorkInstituteofFinance,January1999.
DavidF.Derosa,OptionsonForeignExchange,Wiley3rdeditionAugust2011.
Supplementarymaterial
A.J.FrostandRobertR.Prechter.ElliotWavePrinciple:KeytoMarketBehavior,NewClassicsLibrary,
2012edition.
RobertD.EdwardsandJohnMagee.TechnicalAnalysisofStockTrends,CRCPress10thEdition
November2012.
EdwinLefevre.ReminiscencesofaStockOperator,WileyRevisededitionJanuary2006.
JackD.Swager,Wiley,MarketWizards:InterviewswithTopTraders,January2012.

Buyingoftextbookisoptional.
CopiesofrecommendedtextbooksandsupplementarybookshavebeenrequisitionedbyHonSuiSen
MemorialLibrary.

CourseDescription
ForeignExchange(FX)isanessentialelementofinternationaltrade.Ithasalsobecomeanimportant
globaltradingmarket,thequintessentialmarketforprofessionalfinancialtraders.Thecoursewill
provideagoodplatformforunderstandingglobalfinancialmarkets,ofwhichFXisanintegralpartof.
ThiswillbeillustratedthroughlearningaboutFXslinkagetoactivitiesofkeyinstitutionssuchasbanks,
brokersandcentralbanks,itslinkagetointerestratesanditsroleinthedevelopmentoffinancial
instruments.Intherapidlyevolvingglobalfinanciallandscape,FXisattheforefrontofusage,thanksto
itsrelativeeaseofentryandtheadventofspeedycomputers.Withuncertaintyingeopolitical
developments,andthereadyvolatilityofforeignexchangerates,foreignexchangetradingandhedging
areinseparableessentialsoffinancialmarketriskmanagement.Thecoursewillhelptodemystifythe
FXmarketincludingtheinculcationofanunderstandingoftherisks,rewardandcoststhatthemarket
has.

CourseObjective
Theobjectiveofthiscourseistoprovideapracticalframeworkforstudentstounderstandtheglobal
foreignexchangemarket.Itwillarmthemwiththenecessaryknowledge,competenceandconfidence
tocontinuetounderstandandengageFXandglobalfinancialmarkets,evenasthesemarketscontinue
tochange.Theemphasisthroughoutthecourseistheapplicationoftheorytothemarketplace.

CourseFormat
Thepedagogyinvolveslecture,selflearningthroughreadingandresearch,handsonlearningvia
Bloomberg,casemethod,lessonsgainedfromrecenthistoriceventsanddiscussionofcurrentissues
andevents.Attheendofthecourse,studentswillsitforashorttesttoaffirmtheirunderstanding(or
lackof)ofthesubject.
Studentswillbeencouragedtokeepabreastofcurrentaffairsviareadingoffinancialnewspapersand
digitalmediasuchasWallStreetJournal,FinancialTimes,CNBC,Reuters,Bloomberg,etc.Itishoped
thatsuchhabitsthusdeveloped,willgenerateinterestandsustainpassionforthesubjectaswellas
developglobalfinancialmarketscognizance.
Classparticipationisanintegralpartofthelearningprocess.Asidefrombeingassessedonroutineclass
participationandIVLEforums,studentswillformgroupstotackleassignedcases.Thiswillenhancetheir
learningthroughsharedresourceanddiscussionaswellastobeopentocritiqueastheypresenttheir
findingstotheclass.


Grading
Thestudentscoursegradeisbasedontheoverallperformancealongthefollowingweightage:
Components
Classparticipation
Finaltest
Casesummaryreports

30%
40%
30%
Totalassessment 100%

Thefinaltestcomprisesasectionofmultiplechoicequestionsandasectionofnonmultiplechoice
questions.
Financialcalculatorsareneededinthetestaswellasinclass.

Groupsandcasework
Groupsofstudentswillbeformedforthepurposeofcasestudywork.Groupassignmentwillbedone
onWeek3.

Attendance
Asthisisa6weekmodule,studentsmustnotmissmorethanoneclass(absenceonmedicalgrounds
supportedbymedicalcertificateorcompassionatereasons,notcounting).Perpetratorsriskfailingthe
entiremodule.Studentswhomissthefinaltestwillreceivezeromarksforthatcomponentofgrading.
Absenteesduetomedical(supportedbymedicalcertificate)orcompassionatereasonsmaybegivena
substituteformofassessment.

Lesson Schedule (Tentative):

Week

Week
Starting

Aug 11

Topic and Activity

Current state of FX market: how we got here

Chapters

Eun 2, 5, 11

Language of the street

Participants of the market
Trading vs investment. Trading vs Gambling
Market risk and other risks

Aug 18

Spot, forward, swap and options

Eun 5, 6, 7

Interest rates and FX

Derosa

How positions are managed

Identifying arbitrage opportunities
Why most people lose money in FX

Aug 21or 22*

Using Bloomberg (Bloomberg representative)

Monetary policy and central bank action

Plaza Accord and Louvre Accord
From Alan Greenspan to Helicopter Ben to Abenomics

(Briefing on student assignments)

4

Sep 1

Student assignment presentation: Hedging FX Risk

Eun 8, 9, 10

Groups 1, 2 & 3

Margin trading
Currency Futures

Eun 7

Sep 8

Student assignment presentation:

Groups 4, 5 & 6

Technical Analysis Rationale and Basics

Murphy

Technical Analysis as a Tool in FX Risk Management

Sep 15

Test

Elliot Wave principle

Learning from recent events:
Asian Financial (Currency) Crisis 1997
Global Financial Crisis 2008
Gold market
FX market: Where do we go from here?

Sep 22

Term Break

*This will be conducted at CAMRI Lab

Frost