Structured Products

With years of experience in managing structured products, our specialist team is focused on providing bespoke solutions to maximise your business’ value. Structured products are extremely versatile, offering greater flexibility than Spot and Forward contracts. These hedging products can be tailored and could save you considerable amounts of money whilst acting as an effective risk management tool, thus reducing a business's risk to the volatile FX market. The versatility of these products allows you to secure a rate of exchange, without removing the opportunities to improve this hedge should the market move in your favour.

Vanilla

A Vanilla Option is a standardised financial instrument that gives the holder the right, but not the obligation, to buy or sell a currency at a predetermined price on a given date.

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Advantages

  • Full protection against a depreciation of the Spot Rate below the Protection Rate
  • Full participation in favourable spot market moves
  • Never be Margin Called

Disadvantages

  • You pay the optional Premium upfront

Scenarios

  1. At expiry, the Spot Rate is worse than the Protection Rate. You have the right but not the obligation to transact the notional amount hedged at the Protection Rate.
  2. At expiry, the Spot Rate is better than the Protection Rate. You can let your Vanilla Option expire and simply transact in the spot market, thus benefiting from the improvement.

Participating Forward

A Participating Forward provides a secure Protection Rate against unfavourable market moves. Upon expiry, if the spot market is more favourable than the Protection Rate, you have the obligation to transact a predetermined percentage of the notional amount at the Protection Rate, whilst the remaining proportion can be booked at the favourable spot rate.

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Advantages

  • Secured hedge against a depreciation of the Spot Rate below the Protection Rate
  • Ability to participate in an appreciation of the Spot Rate above the Protection Rate
  • No premium payable/ Zero cost

Disadvantages

  • Hedged rate is lower than the prevailing market Forward Rate
  • You may be Margin Called

Scenarios

  1. At expiry, the Spot Rate is worse than the Protection Rate. You have the right but not the obligation to transact the notional amount hedged at the Protection Rate.
  2. At expiry, the Spot Rate is better than the Protection Rate. You are obligated to transact 50% of the notional amount hedged at the protection rate. The remaining 50% can be transacted in the spot market, thus averaging your exchange rate.

Collar

A Collar provides you with a secure Protection Rate whilst allowing you to fully participate in favourable exchange rate movements as far as a predetermined Cap Rate. If at expiry the Spot Rate is more favourable than the Cap Rate, you will be obliged to transact at the Cap Rate. If the Spot Rate fixes between the Protection Rate and the Cap Rate you can take advantage of the spot market. If the Spot Rate is less favourable than the Protection Rate, then you have the right to exchange your currency at the Protection Rate.

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Advantages

  • Secured protection against a depreciation of the Spot Rate below the Protection Rate
  • Provides full participation in an apprecitation of the Spot Rate above the Protection Rate
  • No premium payable/ Zero cost

Disadvantages

  • The upside participation is bounded by the Cap Rate
  • Protection Rate is lower than the prevailing market Forward Rate
  • You may be Margin Called

Scenarios

  1. At expiry, the Spot Rate is worse than the Protection Rate. You have the right but not the obligation to transact the notional amount hedged at the Protection Rate.
  2. At expiry, the Spot Rate is better than the Protection Rate and worse than your Cap Rate. You can let your Collar expire and simply transact in the spot market.
  3. At expiry, the Spot Rate is better than the Cap Rate. You are obligated to transact the notional amount hedged at the Cap Rate.

Window Forward Extra

A Window Forward Extra provides a secured Protection Rate of exchange that enables the buyer to hedge whilst potentially allowing you to take advantage of favourable moves up to an agreed Barrier Rate. The Barrier Rate will only be live during a specific period of time defined as a Window. If the Barrier Rate is exceeded during the Window period, the holder of the Window Forward Extra is obligated to transact at the Protected Rate.

More details

Advantages

  • Secured hedge against a depreciation of the Spot Rate below the Protection Rate
  • Ability to participate in an appreciation of the Spot Rate above the Protection Rate
  • No premium payable/ Zero cost

Disadvantages

  • Hedged rate is lower than the prevailing market Forward Rate
  • If the Spot Rate hits the Barrier Rate at any time during the Window Period, you may have the obligation to transact at the Protection Rate
  • You may be Margin Called

Scenarios

  1. At expiry, the Spot Rate is worse than the Protection Rate. You have the right but not the obligation to transact the notional amount hedged from us at the Protection Rate.
  2. At Expiry, the Spot Rate is better than the Protection Rate, having never touched or exceeded the Barrier Rate during the Window Period. You can let your Window Forward Extra option expire and simply transact in the spot market.
  3. At Expiry, the Spot Rate is better than the Protection Rate and during the Window Period the spot rate touched or exceeded the Barrier Rate. You are obligated to transact the notional amount hedged at the Protection Rate.

Currency Solutions Limited is authorised and regulated by the Financial Conduct Authority for the conduct of designated investment business, including advising, arranging and dealing. (FRN 602082)

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Service Excellence Award 2016, Customer Experience Awards Finalist 2016.