Name: Jharna Guha Roy Fin548 CA2
Uploaded: 2022-05-10
Duration: 4 min 24 s
Description: . . Factors affecting Forex and its impact on GDP.

. . Factors affecting Forex and its impact on GDP. 

Scene 1

Factors affecting Forex and its impact on GDP

Case Study 1 - Risk Management during Extended Trading Window

Forex trading takes vicinity across the clock international, starting on Monday morning New Zealand time and remaining 
Friday afternoon New York time. In order to offer a competitive buying and selling environment, EUREX has prolonged 
the buying and selling hours to cowl a buying and selling time of 23 hours. The Forex market futures market changed 
into extended in Feb 2017 and foreign exchange options marketplace was extended with effect from 2 July 2018.

Calculation of preliminary margins for forex futures is unaffected and absolutely integrated into the margin methodology 
called Eurex Clearing Prisma. Margin offsets can be granted among forex options and foreign exchange futures in the 
identical liquidation institution. Margin figures for Clearing Members who are uncovered to foreign exchange products 
are calculated as well among 00:00 and 07:00 CET inside the morning. During this time span, Eurex Clearing will issue 
margin reports to the affected Clearing Members on a 10-minute c program language period showing the margin 
shortfall and surplus. Clearing Members who are actively clearing forex futures should be conscious that the Intra Day 
Margin name technique is applicable in the course of the whole trading day. Margin calls issued between 00:00 and 
07:00 CET can be fulfilled using cash payments in Australian dollars.

Margin calls are constantly referred to as in opposition to the Clearing Member. However, margin calls bobbing up from 
shortfalls on customer bills are calculated one after the other, with car allocation of the coins collateral received to the 
patron collateral pool. For cash collateral underneath all clearing models, the Clearing Member’s present fee 
infrastructure can be used. All Clearing Members need to have access to a USD account for late margin calls.

Mainly there were two risk related to the case

If there's a margin shortfall on a client account under a Clearing Member, Eurex Clearing will issue and technique 
character margin calls for the collateral pool wherein the margin shortfall has came about. Eurex Clearing might also 
issue an intra-day margin name between 7:00 CET and 22:30 CET. Once an intra-day margin name has been issued, the 
Clearing Member has half-hour to:

. .  Enter the lowering risk trades.  Instruct Eurex Clearing to procedure a right away debit in any eligible foreign money against the segregated pool in shortfall- thinking about reduce-off instances. 

Scene 2

 
Instruct Eurex Clearing to procedure a right away debit in any eligible foreign money against the segregated pool 
in shortfall- thinking about reduce-off instances

 
Deliver safety collateral to the collateral pool in shortfall

If no movement is taken within the 30 minutes then Eurex Clearing will routinely coach a debit against the Clearing 
Member’s cash account. If the margin shortfall is a result of a shortfall from a consumer account, then the coins could be 
mechanically allocated to the segregated pool in which the shortfall passed off.

Eurex Clearing’s device closes at 22:30 CET and any overnight margin shortfalls are mechanically debited the subsequent 
morning. Auto-debits are informed by using 07:00 CET and should be funded at the trendy by way of 08:00 CET for EUR 
and USD and by using 09:00 CET for CHF and GBP. If the margin deficit is a end result of a shortfall from a consumer 
account, then the cash may be mechanically allotted to the segregated collateral pool wherein the shortfall took place. 
Credits are instructed thereafter, 08:00 CET for EUR and USD and 09:00 CET for CHF and GBP.

What strategies Eurex implemented in order to reconcile the extended trading window?

In order to reconcile the extended trading window, Eurex has implemented some strategies such as-

 
Proposed Extension of Market - Eurex plans to increase its trading and clearing hours for selected fairness index, 
constant earnings and MSCI futures into the Asian time zone starting from 10 December 2018.

 
Existing procedures for Clearing Members shall stay unchanged as far as possible. Overnight margin calls will 
continue to be debited in the European morning. Moreover, then in a single day margin calls will be considered 
as fulfilled during the extended service hours, i.e. Every collateral pool starts off evolved into the prolonged 
service hours without a shortfall.

 
An intra-day margin name throughout the prolonged provider hours shall handiest be issued below the following 
conditions: 
a. In case of positions modifications at some stage in the prolonged provider hours due to trading and/or

clearing activities (e.G. Function switch, Give-Up/Take-Up etc.)

b. Whilst the intra-day threat restrict of the Clearing Member is handed (10 percent of the Clearing Member’s

 
In case an intra-day margin call desires to be fulfilled all through the prolonged service hours, U.S. Dollar (USD) 
and Australian dollar (AUD) are offered as currencies to cowl such margin name. Already existing USD price 
infrastructures may be utilised. Initially, it will not be feasible to provide securities collateral for the duration of 
the prolonged service hours.

. . . Case Study 2 - Risk Management during Extended Trading Window. 

Scene 3

Case Study 2 - Risk Management during Extended Trading Window

Iceland was among the first countries hit by the financial tsunami of the global financial crisis. With assets 10 times the 
size of GDP and relying on aggressive foreign borrowing, Iceland’s banking system was extraordinarily large relative to 
the economy. When the Icelandic foreign exchange market and banks collapsed, dealing a blow to firms and households 
heavily indebted with foreign currency and inflation-indexed loans.

The IMF was called in, and within 10 days there was an agreement on a set of policy measures. The IMF-supported 
program of $2.1 billion remains among the largest relative to the size of the economy—18 percent of Iceland’s GDP, or 
1,190 percent of Iceland’s quota in the IMF. The support and solidarity of other countries in the region made Iceland an 
example of the ability of the IMF’s seal of approval to catalyze broad international support.

A decade after the crisis outbreak, Iceland has already experienced eight years of robust growth averaging close to 4 
percent. The capital controls have largely been lifted, closing an important chapter in the country’s financial crisis saga. 
Iceland’s current account and budget have remained in surplus for several years. Its gross public debt has declined from 
92 percent of GDP at its peak to 35 percent in 2018. Iceland now has more assets abroad than liabilities, a high level of 
foreign exchange reserves, and banks that are sound and well capitalized.

Iceland’s banking system turned into quite big relative to the economic system as it has properties 10 instances the 
dimensions of GDP and counting on aggressive overseas borrowing,. When the Icelandic foreign exchange marketplace 
and banks collapsed, the króna threatened to spiral out of control, dealing a blow to companies and families heavily 
indebted with overseas currency and inflation-listed loans.

A decade after the crisis outbreak, Iceland has already skilled 8 years of sturdy increase averaging close to four 
percentage. The capital controls have in large part been lifted, remaining an important bankruptcy inside the usa’s 
monetary crisis saga. Iceland’s modern-day account and price range have remained in surplus for numerous years. Its 
gross public debt has declined from ninety two percent of GDP at its peak to 35 percentage in 2018. Iceland now has 
greater belongings overseas than liabilities, a high stage of forex reserves, and banks that are sound and properly 
capitalized.

What strategies Iceland implemented in order to overcome the severe crisis?

 Iceland took some unorthodox measures to overcome the excessive disaster. The application featured policies to

rebuild self belief in the economic system and garner the broadest political guide:

 
Capital Control without any predefined time - Capital controls and not using a predefined time body had been a 
crucial a part of the toolkit to repair monetary balance. They helped stabilize the króna and prevented an boom 
in domestic hobby charges that would have taken a higher toll on boom and stability sheets.

 
Rebuilding the collapsed banking – The rebuilt the collapsed banking machine required by splitting up the banks, 
which were too large to save, and putting public cash most effective in which it was essential. A split between 
the failed banks’ home operations and their a great deal larger foreign operations allowed taxpayer guide to 
recognition on shielding the home economy, whilst maximizing asset recovery.

. .  Phased financial consolidation- Implemented the phase wise financial consolidation and accommodated financial strain throughout the first 12 months of the program and averted a deeper disintegrate in demand as government debt surged because of public guide for the financial zone. Nonetheless, there was a sturdy political dedication to restoring the downward direction of public debt in due path.. 

Scene 4

 
Phased financial consolidation-  Implemented the phase wise financial consolidation and accommodated 
financial strain throughout the first 12 months of the program and averted a deeper disintegrate in demand as 
government debt surged because of public guide for the financial zone. Nonetheless, there was a sturdy political 
dedication to restoring the downward direction of public debt in due path.

 
Safeguarding Iceland’s social welfare system - The key role was to safeguard the Social and Welfare System in 
defensive vulnerable agencies or even decreasing inequality for the duration of the program.

Jharna Guha Roy Fin548 CA2

Page 1 (0s)

Page 2 (1m 8s)

Page 3 (2m 29s)

Page 4 (4m 2s)