What is a forward?
Who can benefit from forwards?

A forward is an agreement governing the purchase or sale of one currency against another at a rate and on a date that have been previously established. It is a future-dated transaction designed to reduce currency risk and should not be used for speculative purposes.

Simply put, a forward sets the future exchange rate at the present date. On the date of the agreement between your firm and our bank, the amount, price and maturity are agreed upon, but no money changes hands. On date set in the agreement, the parties fulfill their obligations to one another on the basis of the agreed upon exchange rate.

Forward Contract is binding on both parties. In order to eliminate certain risks, such as non-fulfillment of the contract, a certain percentage of the value of the contract may be required as security.

Foreign Exchange Excise Duty resulting from the purchase or sale of foreign exchange will be collected from the customer separately. The minimum limit for a forward transaction is USD 50,000.

Forward eliminates uncertainty for companies with future value date receivables and payables. The future value date exchange rate, and therefore the total amount, is fixed, ensuring that your operating profits are not subject to fluctuations in the foreign exchange markets.

• In this transaction the parties have an obligation to buy or sell.
• The amount of foreign currency is definite and fixed.
• The agreed upon price is binding.
• The agreed upon maturity is definite.
• Hedges the customer against unfavorable exchange rate movements.
• The parties to the agreement have an obligation to fulfill their responsibilities on the maturity date.
• No premiums are paid.
• This product is based entirely on the interest rate differential and has no relation to the Bank’s interest rate outlook for the date in question.

What is a Foreign Currency Option?
Who can benefit from Foreign Currency Options?

Option is a Latin word that means choice. Simply put, options are instruments that give one the right to buy or sell an asset of any sort on a specific date. The most important feature of this product is that it allows the party holding the option to choose not to exercise the option on the expiration date.

A Foreign Currency Option agreement is an agreement between the Bank, which sells the option, and a company, which buys the option, giving the company the right to buy or sell at a rate established between two currencies on or prior to a specific date in exchange for the payment of an option premium. The company purchasing the option has the sole right to determine whether or not to exercise the option at the agreed upon rate.

A Foreign Currency Option is the right to buy or sell a fixed amount of one currency in exchange for a fixed amount of another currency at a previously determined price on a set future date.

The most important feature of a Foreign Currency Option, and what distinguishes it from a Forward Contract, is that the party buying the option has the right, rather than the obligation, to buy or sell at the agreed upon price. In exchange for this right, the holder of the option pays an option premium at the time that the option is granted.

The party purchasing the option, in exchange for the option premium paid, gains the right, on the basis of market conditions, to choose whether to exercise or not to exercise the option at the previously agreed upon maturity and exchange rate. An option premium, in this sense, resembles an insurance premium. Premium amounts depend on a number of factors, including the amount of the option, the currencies involved and the exercise date, including exchange rate volatility, the strike price, the option duration and the buy-sell position. The option holder’s loss is limited to the option premium.

Foreign Currency Options are ideal for customers who expect a unfavorable movement in exchange rates but would like to benefit from any potential movement of rates in their favor.

Foreign Exchange Excise Duty resulting from the purchase or sale of foreign exchange will be collected from the customer separately.

• An option gives the holder the right, but does not impose the obligation, to buy or sell a fixed amount of foreign exchange at a set price (the strike price) on a set date.
• Options protect the holder from unfavorable movements in exchange rates but also give them the opportunity to benefit from favorable movements in rates.
• The option holder, in exchange for this right, pays an option premium at the signing of the contract. This premium is not refunded regardless of whether or not the option is exercised.
• The option holder’s risk is limited to the amount of the option premium, the seller’s risk is unlimited.

What is a Corridor Option?
Who can benefit from Corridor Options?

A Corridor Option is a product that consists of two options: the purchase of an option right for a set maturity and price and sale of a right for the same maturity at another price.

This product provides protection against unfavorable movements in foreign exchange rates but limits benefiting from the upside potential of favorable movements. However, it does make it possible to eliminate the cost of the option premium.

Foreign Exchange Excise Duty resulting from the purchase or sale of foreign exchange will be collected from the customer separately.

• The structure consists of two separate option transactions (one call option and one put option) with different strike prices.
• This structure provides the customer with 100% protection but, in exchange for eliminating the cost of the option premium, the customer sacrifices some upside potential as a result of market movements.