FORWARD - currency protection
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Whether you need to sell or buy currency in the future, with the help of forward contracts "Forward" benefit from the certainty of future financial flows.
Do you think you are exposed to a currency risk that could have a negative impact on your financial situation?
With the Forward contract, you get rid of the uncertainty of the adverse evolution of the exchange rate.
With the Forward contract you can reduce your exposure to currency risk. Set the exchange rate now and make the currency exchange in the future.
The performance of Forward contracts is not guaranteed as it is subject to exchange rate fluctuations.
For trading you need to provide collateral to cover the adverse movements of the exchange rate until maturity.
These are complex products regulated by MiFID II.
The Forward exchange rate is established on the basis of the spot exchange rate and the interest rate differential between the two currencies.
At the date of the transaction, the Forward contract is concluded by establishing the currencies involved, the direction, the trading amount (s), the forward exchange rate and the settlement date.
SWAP - monetary protection
An interest rate swap (IRS) is a transaction in which two parties exchange interest with each other, using the same principal, at predetermined dates, for the entire term of the contract.
One counterparty pays a fixed rate and the other a variable rate (depending on a reference rate).
With the help of an interest rate SWAP you can change the variable interest rate with a fixed one. This way, you will know exactly the amount of interest expenses for the entire loan period.
In addition, this way you can protect yourself against rising interest rates
Depending on your company's needs, you can exchange fixed interest rates with variable interest rates.
So, if you have interest rate hikes, you have to pay lower interest rates than you already pay.
Given the possibility of adverse changes in interest rates, entering into such a transaction implies the existence of collateral (determined by interest rate volatility, the term of the transaction, etc.).
These are complex products covered by MiFID II for which specific documentation must be signed.
Our dedicated staff is at your disposal for any information about our products and services at: 021 303 69 69 or 0800 801 802.
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