From ACT Wiki
Jump to navigationJump to search

1. Numerical relationships.

Straight-line, or approximately straight-line.

2. Interest rate derivatives.

Describing interest rate derivatives whose values are determined primarily by the reference interest rate, in an approximately proportional relationship.

Examples include interest rate swaps and forward rate agreements.

Contrasted with non-linear interest rate derivatives.

3. Foreign exchange contracts.

Describing foreign exchange contracts whose values are determined primarily by the related foreign exchange rate, in an approximately straight line - or sometimes exactly straight line - relationship.

Examples include forward foreign exchange contracts.

Contrasted with non-linear - or exotic - contracts.

Corporates act to mitigate FX volatility
“Currency volatility has become one of the dominant macroeconomic trends of the year. The dollar has surged to 20-year highs while the pound and euro have slumped to 50- and 20-year lows respectively. The pressure on corporates is intensifying as they adapt to this new environment.
“During calmer times pre-COVID-19, some corporates moved towards more exotic products. Now they appear to be reverting back towards the more straightforward linear products such as forwards, which are more liquid and easier for corporates to unwind should the market move against them.”
Eric Huttman, CEO at MillTechFX, The Treasurer online - 14 October 2022.

See also