FX Specialist 1 study plan

Map the structure of the FX market: identify the roles of central banks, commercial banks, brokers, and corporates, and explain how interbank and retail pricing differ.

Define and distinguish bid, ask, spread, pip, and big figure, and compute spreads in pips for at least five quoted pairs.

Convert direct and indirect quotations into each other, and explain base/quote currency convention using USD/JPY, EUR/USD, and GBP/USD examples.

Calculate cross rates from two USD-based quotes and verify the result against the inverse quote.

Describe the difference between real and nominal exchange rates and list three drivers of currency demand (interest differentials, trade flows, risk sentiment).

Distinguish spot (T+2) from forward settlement, and explain when T+1 or same-day value applies.

Compute forward points and the outright forward rate from spot and interest rates using covered interest parity.

Calculate the forward premium or discount in annualized percentage terms and interpret its direction.

Explain how forward rates are used by an exporter and an importer to lock in a future receivable or payable.

Identify the credit and settlement risks that remain in a forward contract even after the rate is fixed.

Compute outright forward rates from spot and forward points for at least four currency pairs, including pairs quoted with JPY.

Apply the correct bid/ask side when a client buys or sells a forward, and explain why the spread widens with tenor.

Derive a cross forward rate from two USD forward quotes and check consistency.

Calculate the all-in cost of a forward hedge for a corporate with a known foreign-currency cash flow.

Explain how forward points behave when the base currency interest rate is higher than the quote currency rate.

Describe the mechanics of a currency swap: near leg, far leg, exchange of principal, and periodic interest exchanges.

Distinguish a currency swap from an FX swap and from a cross-currency interest rate swap, with one concrete example each.

Explain how FX swaps are used to fund a currency position and how the swap points relate to the forward points.

Identify the main FX derivatives (forwards, futures, options, swaps) and match each to a stated hedging or speculative need.

Explain the payoff profile of a plain vanilla FX option at expiry and define strike, premium, and breakeven.

Identify transaction, translation, and economic exposure for a company with foreign sales and a foreign subsidiary.

Select an appropriate hedge (forward, option, or swap) for each exposure type and justify the choice.

Calculate the hedged outcome of a foreign-currency receivable under a forward hedge and compare it with an unhedged scenario.

Explain how a currency option floor or collar limits downside while retaining some upside, and compute the net premium of a simple collar.

Describe Value at Risk in plain terms and explain how a firm could use it to size an FX hedging program.

Summarize the core obligations of FX market conduct rules: best execution, transparent pricing, and prohibition of manipulative practices such as fixing.

Explain know-your-customer and anti-money-laundering requirements as they apply to FX onboarding and transaction monitoring.

Identify the records that must be retained for FX transactions and the typical retention period.

Distinguish permissible market communication from conduct that could be considered front-running or collusion.

Apply an ethical decision framework to a scenario involving a client request for a rate that is not currently available.

Trace the life cycle of an FX trade from execution through confirmation, settlement, and reconciliation.

Explain the role of CLS and correspondent banking in reducing settlement risk, and describe Herstatt risk.

Identify the key fields of an FX confirmation (trade date, value date, counterparty, amounts, rates) and common causes of mismatches.

Describe how payment netting and bilateral netting agreements reduce settlement exposure.

List the documents used in trade finance FX (letters of credit, drafts) and how they interact with FX settlement.

Complete a full-length timed practice exam under exam conditions and score it by domain.

Review every missed question and write the correct concept in your own words.

Re-drill the two lowest-scoring domains with targeted calculation and definition exercises.

Recite the key formulas (cross rate, forward points, covered interest parity, annualized premium, option breakeven) from memory.

Build a one-page final review sheet of conduct rules, settlement steps, and hedging instrument selection.