Deal contingent forward: Difference between revisions
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<span style="color:#4B0082">'''''Reverse complexity'''''</span> | :<span style="color:#4B0082">'''''Reverse complexity'''''</span> | ||
:"There is quite often a risk around the FX of these transactions, which comes from the fact that we are raising equity in sterling to make a euro transaction acquisition. | :"There is quite often a risk around the FX of these transactions, which comes from the fact that we are raising equity in sterling to make a euro transaction acquisition. | ||
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== See also == | == See also == | ||
* [[Acquisition]] | * [[Acquisition]] | ||
* [[Contingency]] | |||
* [[Contingent]] | |||
* [[Equity]] | * [[Equity]] | ||
* [[Foreign exchange forward contract]] | * [[Foreign exchange forward contract]] | ||
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* [[Hedging]] | * [[Hedging]] | ||
* [[Transaction]] | * [[Transaction]] | ||
[[Category:Manage_risks]] | |||
Latest revision as of 20:38, 10 September 2022
Foreign exchange risk management.
A deal contingent forward is a specialised forward foreign exchange (FX) contract.
The hedging customer is only obliged to fulfil the contract if a planned major transaction, such as an acquisition, occurs.
- Reverse complexity
- "There is quite often a risk around the FX of these transactions, which comes from the fact that we are raising equity in sterling to make a euro transaction acquisition.
- Obviously, if the relative value of sterling and the euro changes between the point that you commit to raise the sterling and spend the euros, there is a risk associated.
- That involved us putting in place a deal contingent forward.
- This is basically a forward contract where the banks agree with you that if the transaction does not occur, then it expires worthless, but if the transaction goes through, then you get a specific FX rate."
- Adam Richford FCA FCT, Group Treasurer, Renewi, The Treasurer, August 2018, p18.
