The target group for active currency risk management is corporates with cash or securities assets, investments and outstanding claims and obligations in their local or foreign currencies. All of these balance sheet items can be affected by exchange rate shifts, with small fluctuations making the difference between the success or failure of a transaction, or even between an operating profit or loss for the year.
Hedging instruments can be used to manage exchange risks actively and separately from the underlying transactions. If an instrument should be used, and if so which instrument, depends on the expectations, the costs, the risk profile and the objectives of the customer.
Forward exchange transactions
A forward exchange transaction comprises a fixed obligation to buy or sell a certain amount of foreign currency at a later point in time, or during a certain period, at an exchange rate agreed when the transaction was concluded. The supply or receipt of the other currency ensue as of the same value date.
Upon payment of a premium the buyer of an FX option is entitled, but not obliged, to buy (call option) or sell (put option) a certain amount of foreign currency at a rate determined in advance (exercise price) and at a future date (European option) or during a specific period (American option). Please note that the Bank does not exercise your option rights without your explicit instruction.
We distinguish between