Foreign Exchange and Money Markets: Theory, Practice and Risk Management

By Bob Steiner

Overview

Published in 2002 by Butterworth-Heinemann as part of the Securities Institute's Global Capital Markets Series, this book provides a professional-level reference on the foreign exchange and money markets. Bob Steiner, a financial markets practitioner and trainer, covers the full range of FX and money market instruments with emphasis on the practical calculation methods and risk management techniques used by banks and corporate treasuries.

Key Themes and Arguments

Foreign Exchange Markets

The book covers the structure and mechanics of the FX market, including spot transactions, forward FX, FX swaps, and currency options. Steiner explains the quotation conventions, calculation methods, and market practices that professional FX traders must understand.

Money Markets

Comprehensive coverage of money market instruments includes Treasury bills, commercial paper, certificates of deposit, repos, and interbank deposits. The book explains the different day-count conventions, yield calculations, and pricing methods used across different money market instruments and jurisdictions.

Interest Rate Mathematics

A substantial portion of the book is devoted to the mathematics of interest rates, including simple and compound interest, discount factors, forward rates, yield curves, and the relationship between different interest rate measures. These calculations form the quantitative foundation for both FX and money market trading.

Risk Management

The book addresses the risk management of FX and money market positions, including gap analysis, duration, value-at-risk, and the specific risks associated with different instrument types. Steiner explains how these risks are measured and managed within bank treasury operations.

Practical Orientation

Throughout the text, Steiner maintains a practical orientation with worked examples, market conventions, and the operational considerations that practitioners encounter in their daily work. This practical focus distinguishes the book from more theoretical academic treatments.

Significance

This book serves as an essential reference for anyone working in or seeking to understand the professional FX and money markets. Its combination of theoretical explanation and practical calculation makes it valuable for both learning and daily reference.