Activ configuration

The target group for an active exchange risk management are companies with cash or securities credit, investments as well as outstanding receivables and liabilities in national currency or foreign currency.

All these balance sheet positions can be sensitive to exchange rates and in the event of changes in exchange rates decide over the success or failure of the business or even the company result.

The currency risk can be separated from the actual underlying transaction and actively configured through the use of hedging Instruments. Whether and which instrument is used depends on the expectation, the costs, the risk profile and the target specification of the company.

Forward exchange transaction

A forward exchange transaction incorporates the firm obligation to buy or sell a certain foreign currency amount at a later point in time or during a period of time at a rate determined on conclusion. The delivery or the receipt of the counter currency will be done at the same value.

Exchange option

In return for the payment of a premium, the buyer of an exchange option acquires the right but not the obligation to buy (call option) or sell (put option) a certain foreign currency amount at a rate defined in advance (strike rate) at a future point in time (European option) or during a defined period of time (American option). Please note that the bank will not exercise your option rights without your explicit order.

A differentiation is made between the following:

  • Purchase of foreign exchange options that offer a “right” (exchange rate hedging instrument - premium costs)
  • Sale of foreign exchange options that include an “obligation” (no exchange rate hedging instrument - premium income)
  • Option strategies (combinations from a purchased and sold option)

Further topics: