If you do business abroad, you are exposed to currency risk. Currency risk represents a potential loss due to a change in the exchange rate, which everyone who does business abroad is exposed to. A change in the exchange rate affects the cash flow of already concluded deals as well as the cash flow that will result from future deals. To protect your currency risk, you can choose derivative financial instruments, which you can use to control future income and expenses and the operating result of your company today.
Currency Forward (FX Forward)
It is the purchase or sale of a specified amount of the selected currency at an agreed forward rate with a transaction maturity date longer than two business days. The forward exchange rate is calculated based on the current exchange rate on the market and the difference in the interest rates of the corresponding currencies until the maturity date of the transaction. The forward rate can be higher or lower than the current rate. The new KBM offers companies the option of concluding a futures transaction with a maturity of two years.
Advantages
today secure the rate at which you will exchange a currency pair on a selected date in the future |
you can choose the due date yourself |
you avoid the uncertainty and possibility of business loss that you would suffer from an unfavorable exchange rate movement |
you are not burdened with exchange rate risk and can focus on your core business |
no premium is paid. | |
FX Flexible Forward
In a flexible futures transaction, the customer buys a predetermined amount of one currency (e.g. USD base amount) and sells an amount in another currency (e.g. EUR) at a predetermined forward rate and after a predetermined period in the future. On any day within the period, the customer can make a purchase of currency in whole or in part (up to the agreed total indicative amount). Upon predetermining the forward exchange rate on the due date, the customer will:
Advantages
get today the rate at which you will exchange a pair of currencies on a selected day in the future; |
you avoid uncertainty and the possibility of business losses that you would suffer due to unfavorable exchange rate movements; |
you are not burdened with exchange rate risk and can focus on your core business; |
no premium is paid. |
| RULES FOR BUSINESS WITH FINANCIAL INSTRUMENTS |