SIAA Foreign Exchange study guide
SIAA Foreign Exchange · Work through your exam, one topic at a time.
The SIAA Foreign Exchange credential is a professional certification for practitioners who price, trade, sell, hedge, or oversee foreign exchange products. Candidates typically come from bank treasury and sales desks, corporate treasury functions, asset managers, brokers, and compliance or operations teams supporting FX activity. The SIAA Foreign Exchange study guide has 10 sections and about 3,720 words.
01Foreign Exchange Market Structure and Participants
The foreign exchange market is an over-the-counter, decentralised, largely bilateral market that trades continuously across time zones. Candidates must know the participant taxonomy: central banks and treasuries, commercial and investment banks (dealers), non-bank market makers, corporate hedgers, institutional investors and asset managers, retail brokers, and brokers/interdealer platforms.
361 words, about 2 min02Spot Exchange Rates and Quotation Conventions
Every FX quote pairs a base currency (the one unit being priced) and a quote or term currency (the currency in which the price is expressed). In EUR/USD = 1.0850, one euro costs 1.0850 US dollars.
383 words, about 2 min03Forward Contracts and Outright Forwards
An outright forward is a single binding agreement to exchange a specified amount of two currencies on a future value date at a rate fixed today. It is a principal-to-principal OTC contract, creates no upfront premium, and carries counterparty credit exposure.
370 words, about 2 min04Foreign Exchange Swaps and Currency Swaps
A foreign exchange swap is a short-dated transaction combining a spot (or near-dated forward) leg and an offsetting forward leg in the same currency pair, used to manage short-term liquidity and roll value dates. A currency swap (cross-currency swap) is a longer-dated agreement to exchange principal in two currencies at inception and re-exchange at maturity, with periodic interest payments in each currency.
360 words, about 2 min05Currency Options and Structured Products
A currency option gives the buyer the right, but not the obligation, to exchange one currency for another at a specified strike on or before expiry. Calls and puts are defined relative to the base currency in the stated quote.
368 words, about 2 min06Interest Rate Parity
Covered interest rate parity (CIP) states that the forward premium or discount equals the interest rate differential between two currencies, so that a hedged borrowing and lending strategy yields no arbitrage profit. Uncovered interest rate parity (UIP) is an expectation-based relationship: the expected change in the spot rate equals the interest rate differential.
334 words, about 2 min07Cross Rates and Arbitrage
A cross rate is an exchange rate between two currencies derived from their respective rates against a common third currency, usually the US dollar. To compute a cross rate, multiply or divide the two dollar-based quotes so the common currency cancels.
329 words, about 2 min08Foreign Exchange Risk Management and Hedging
Candidates must distinguish transaction exposure (known or forecast foreign currency cash flows), translation exposure (accounting impact of consolidating foreign subsidiaries), and economic or operating exposure (long-run effect of rate changes on competitiveness and value). Each calls for different hedging approaches and horizons.
291 words, about 1 min09Regulatory, Compliance and Ethical Standards
FX is regulated through a patchwork of conduct, prudential, and market-abuse rules rather than a single global regime. Candidates must know the roles of national regulators, the FX Global Code as a voluntary principles-based standard, and the importance of benchmark reform (the shift from interbank offered rates to risk-free rates) for FX products.
322 words, about 2 min10Settlement, Clearing and Operational Risk
FX settlement involves payment versus payment (PVP) through CLS or bilateral arrangements, value dating, and confirmation matching. Candidates must understand T+2 conventions, the role of CLS in reducing Herstatt risk (the risk that one leg pays and the counterparty fails before the other leg settles), and the difference between bilateral settlement and central clearing.
602 words, about 3 min