INTERNATIONAL BANKING - Foreign Exchange
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| Risk Management |
| Our FX specialists develop hedging strategies in consultation with individual customers. We offer several different types of FX contracts to fit our customers' diverse needs. See below for an overview of our risk management product offerings. |
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Our FX specialists work with commercial customers to design customized hedging strategies to minimize risk in foreign markets. We have a diverse set of product offerings to fit our customers' different needs: |
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| Spot Contract |
Exchange of one currency for another for delivery two business days from the transaction date, with the exception of the Canadian dollar which is delivered one business day from the trade date.
Ideal for companies who occasionally make or receive payments in foreign currencies, or who need to arrange a foreign exchange transaction right away. |
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| Forward Contract |
Exchange today of one currency for another for delivery beyond two business days from the transaction date. Forward rates are based on the spot rate adjusted by the interest rate differential between the two countries.
Ideal for companies with predictable cash flows in foreign currencies in order to protect against possible adverse movements of exchange rates. |
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| Flexible Forward |
Similar to a regular forward, a flexible forward is a contract which will settle during a future period. Companies can strip down pieces of the principal within the predetermined "window."
Ideal for companies with regular but unpredictable cash flows in foreign currencies. This type of contract allows for flexibility with the timing of the conversion while maintaining a set conversion rate throughout the window. |
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| Non-Deliverable Forward |
A synthetic contract used to hedge foreign currency risk where no traditional forward market exists (such as India, China, and Brazil). No delivery of foreign currency occurs under this contract; the contract is net settled in U.S. dollars to offset the change in market pricing of the hedged foreign currency.
Ideal for companies who have foreign exchange exposure in countries where a freely traded forward market does not exist. This type of hedge is used to protect the margins on a U.S. dollar-based cash flow. |
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| Foreign Currency Swap |
A contract which simultaneously combines the purchase and sale of one currency against another with two different value dates. A swap consists of a spot transaction and a forward transaction, executed simultaneously for the same quantity.
Ideal for companies already holding forward contracts that need to be adjusted due to timing issues or exposure changes. Also used to hedge inter-company loans in foreign currencies with predictable pay-back schedules. |
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| Foreign Currency Option |
The right, not the obligation, to buy or sell a currency using a call/put option against another at a specified rate (known as the strike price) at a specified date in the future.
Ideal for companies who are willing to pay a premium in order to hedge against downside risk while receiving unbounded upside potential. |
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If you have any questions, please call our Foreign Exchange Desk at (888) 819-8883. |
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