Pensions and Retirement Training Course on Currency Risk Management
Master Pensions Retirement Training with expert training. 10 Days course with certification. Comprehensive training program. Online & in-person. Enroll now!
Pensions And Retirement Courses10 DaysCertificate Included
Duration
10 Days
Mode
Online & Physical
Certificate
Included
Language
English
Course Overview
This intensive course equips pension fund professionals with advanced knowledge and tools to identify, measure, and manage currency (foreign exchange) risk in international investment portfolios. Participants will gain a thorough understanding of how currency fluctuations impact returns, funding ratios, and asset-liability alignment. The course explores hedging strategies, derivative instruments, policy design, and governance frameworks, ensuring that participants can effectively integrate currency management within overall investment and risk management structures for pension funds.
Secure enrollment • Professional certificate included
Learning Objectives
By the end of the course, participants will be able to:
Understand the nature and sources of currency risk in global pension fund portfolios.
Assess the impact of exchange rate volatility on asset and liability valuations.
Identify different types of currency exposure: transactional, translational, and economic.
Apply hedging and diversification strategies to mitigate currency risk.
Utilize derivatives such as forwards, swaps, and options in foreign exchange risk management.
Develop and implement a comprehensive currency hedging policy.
Integrate currency risk into strategic asset allocation (SAA) and LDI frameworks.
Analyze the influence of macroeconomic and geopolitical factors on currency movements.
Evaluate the cost-benefit trade-offs of active versus passive currency management.
Establish governance, compliance, and reporting mechanisms for currency risk oversight.
Course Content
Module 1: Introduction to Currency Risk in Pension Funds Definition and types of currency exposure in pension portfolios Role of foreign assets in diversification and return enhancement Overview of FX market structure and key participants Measuring currency risk and its impact on fund performance Case study: Impact of exchange rate volatility on a global equity portfolio
Module 2: Sources and Measurement of Currency Exposure Types of exposure: transactional, translational, and economic Quantifying FX exposure in global investment portfolios Identifying natural hedges in multi-currency portfolios Measuring effective currency exposure at asset and total fund levels Workshop: Calculating unhedged vs. hedged portfolio returns Module 3: Currency Valuation and Determinants of Exchange Rates Theoretical frameworks: Purchasing Power Parity (PPP), Interest Rate Parity (IRP), and Balance of Payments Role of inflation, interest rate differentials, and monetary policy Short-term vs. long-term drivers of currency movements Geopolitical and macroeconomic influences on currency risk Scenario analysis: Predicting FX movements under changing economic conditions
Module 4: Risk Identification and Quantification Tools Statistical tools for measuring currency risk (VaR, CVaR, tracking error) Historical and implied volatility analysis Correlation of FX rates with other asset classes Stress testing and sensitivity analysis Workshop: Building a currency risk exposure dashboard in Excel Module 5: Passive Currency Hedging Strategies Objectives and rationale for passive hedging Forward contracts and rolling hedging programs Currency overlay strategies and benchmark construction Evaluating hedge ratios: 0%, 50%, 100%, and dynamic approaches Cost analysis of passive hedging programs Case study: Passive hedging policy for a global pension fund Module 6: Active Currency Management Strategies Overview of active FX management and return generation opportunities Tactical hedging and overlay adjustments Currency factor models (carry, momentum, value, volatility) Integration of active FX views within the investment process Measuring alpha from active currency management Workshop: Simulating performance of an active currency overlay strategy Module 7: Use of Derivatives in Currency Risk Management Overview of FX derivatives: forwards, futures, swaps, and options Hedging mechanics, margining, and settlement processes Cross-currency swaps and NDFs (non-deliverable forwards) Option-based hedging: collars, risk reversals, and zero-cost structures Managing counterparty, liquidity, and operational risks Practical exercise: Structuring derivative-based currency hedges Module 8: Integrating Currency Risk Management in Portfolio and ALM Frameworks Linking currency exposure with asset-liability management (ALM) Hedging foreign-denominated liabilities and cash flows Multi-currency liquidity and funding management Incorporating FX risk into strategic and tactical asset allocation decisions Portfolio optimization with currency hedging constraints Simulation: Currency-hedged vs. unhedged ALM performance scenarios Module 9: Governance, Policy, and Regulatory Considerations Governance frameworks for currency risk management in pension funds Roles of trustees, investment committees, and overlay managers Regulatory and accounting implications (IFRS 9, IAS 21) Policy development: defining objectives, limits, and benchmarks Reporting structures, compliance monitoring, and audit requirements Case study: Developing a currency hedging policy for a multinational pension fund Module 10: Monitoring, Performance Evaluation, and Best Practices Measuring effectiveness of hedging programs Attribution analysis: separating FX returns and hedge impact Performance metrics: hedge ratio, slippage, tracking error Reviewing and adjusting hedging strategies under changing conditions Best practices in FX governance, documentation, and reporting Capstone project: Designing a complete currency risk management framework for a pension fund
Who Should Attend
Pension fund managers, treasury officers, investment strategists, portfolio analysts, risk managers, actuaries, compliance officers, and trustees involved in international investment, ALM, or hedging oversight.
