FX Forward
FX forward is a contractual agreement between the client and the bank, which the customer agrees to buy or sell another currency with a specific amount of money at a predetermined exchange rate on a specific date or period that is more than two business days after the transaction date. The pricing of the contract is determined by FX spot rate, interest rate differentials between the two currencies and the length of the contract.
FX Swap
FX swap is agreed by both parties to exchange two currencies, and exchange back on the agreed maturity date. It can be considered as a short term loan covered by a placement in another currency. At the maturity date, the client can choose from settlement or rollover. Before rollover, gain or loss on the original contract must be settled.
FX Option
- Option buyer- a contract that gives the buyer the right to buy or sell FX on a specific date (the expiry date) at a specific price (the strike price). A premium is paid for this right to the seller who bears the volatility risk.
- Option Seller-Premium is paid to option sellers, but sellers assume the obligation of buying or selling FX on a specific date (the expiry date) at a specific price (the strike price).
