Open forward contract: Difference between revisions
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:"Flexibility is super key for me... | :"Flexibility is super key for me... | ||
: | :It's good to have a product mix that matches a more volatile situation, and that is open forwards with FX options." | ||
:''Philip Stephens, head of corporate FX dealing at Argentex - The Treasurer 2025 Issue 1 - page 16.'' | :''Philip Stephens, head of corporate FX dealing at Argentex - The Treasurer 2025 Issue 1 - page 16.'' | ||
Other names for open forward contracts include ''open window forwards'', ''optional forward contracts'', | Other names for open forward contracts include ''open window forwards'', ''optional forward contracts'', ''window forward contracts'', ''time option forwards'' and ''option dated forward contracts''. | ||
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* [[Foreign exchange forward contract]] | * [[Foreign exchange forward contract]] | ||
* [[Foreign exchange risk]] | * [[Foreign exchange risk]] | ||
* [[Forward]] | |||
* [[Forward contract]] | * [[Forward contract]] | ||
* [[Forward discount]] | * [[Forward discount]] | ||
Latest revision as of 21:51, 27 February 2025
Risk management - foreign exchange.
An open forward contract is a foreign exchange forward contract that provides flexibility - to the party hedging its foreign exchange risk - over the date at which the currencies are exchanged.
This effectively provides an option in favour of the hedger.
The option may be paid for by:
- An up front premium;
- An adverse forward rate in the contract, compared with the current market forward rate; or
- A combination of these.
The hedger is obliged to make the exchange within a pre-specified time window.
- Open forwards with FX options give flexibility
- "Flexibility is super key for me...
- It's good to have a product mix that matches a more volatile situation, and that is open forwards with FX options."
- Philip Stephens, head of corporate FX dealing at Argentex - The Treasurer 2025 Issue 1 - page 16.
Other names for open forward contracts include open window forwards, optional forward contracts, window forward contracts, time option forwards and option dated forward contracts.
See also
- Bilateral
- Contract
- Deal contingent forward
- Derivative instrument
- Dynamic forward contract
- Fixed forward contract
- Fixing instrument
- Foreign exchange forward contract
- Foreign exchange risk
- Forward
- Forward contract
- Forward discount
- Forward exchange market
- Forward foreign exchange rate
- Forward margin
- Forward market
- Forward points
- Forward premium
- Forward price
- Forward rate
- Futures contract
- Hedging
- Option
- Risk management
- Risk response
- Transfer
- Volatility
