Currency trading

FX market forms a part of the financial market. Mutual exchanges of individual foreign currencies such as import payments, export collections and also other transactions having influence on the exchange rate of a domestic currency vis-à-vis foreign currencies take place in FX market.

FX market is a prompt market in which non-term and spot deals (FX conversion, FX arbitrage) or term deals (swaps, forwards, futures, options) are closed. Moreover, one of the roles of FX market is to hedge against FX risk (hedging).

FX Spot Transactions

Spot currency conversion is a purchase of a certain amount of one currency for another at a rate which is derived from the current foreign currency market price at a given moment. They are used for conversions at payments transferred to, or received from abroad, or transfers between accounts with different denominations of a certain entity.

Settlement of transactions is realized with a spot exchange rate, i.e. 2 business days after the transaction. The client may request settlement with the exchange rate identical to that of the date of conversion agreement (D+0) or the next business day (D+1), when the resulting rate is adjusted for the interest differential.

Conditions

Framework Derivatives Agreement signed

Contact

Corporate Sales
02/5055 9650, 02/5055 9620, 02/5055 9610, 02/5055 9595, 02/5055 9520

FX Forwards

Forwards are transactions representing the commitment to mutual interchange of two currencies with a maturity exceeding that of the spot exchange rate, i.e. at least D+3, and with the future rate fixed on the institution date of the commitment. This means fixing the exchange rate in respect of future conversions for the purpose of hedging exchange rate risk in connection with the management of cash flows in different currencies.

The forward rate is derived from the spot rate, with adjustment for forward points, which represent the interest differential for the period to the forward maturity date. On the institution date of the commitment no interchange of cash between the client´s accounts occurs, it is only done on the maturity date.

Forwards do not present standardised products, i.e. amounts and maturity dates are agreed individually according to the client’s requirements.

Application:
  • an instrument for securing exchange rates of cash flows in foreign currencies against fluctuations in foreign exchange markets.
  • an instrument for fixing the price of a commodity in advance
Conditions

Framework Derivatives Agreement signed

Contact

Corporate Sales
02/5055 9650, 02/5055 9630, 02/5055 9620, 02/5055 9610, 02/5055 9595, 02/5055 9520

FX Swaps

FX swaps present a combination of currency spot and forward operations. They involve the purchase/sale of one currency for another with the concurrent repurchase/resale after a certain period of time at an agreed rate, while the transaction volume remains unchanged.

Types of swap transactions:
  • buy and sell (spot purchase of the base currency + forward sale of the base currency)
  • sell and buy (spot sale of the base currency + forward purchase of the base currency)
Conditions

Framework Derivatives Agreement signed

Contact

Corporate Sales
02/5055 9650, 02/5055 9630, 02/5055 9620, 02/5055 9610, 02/5055 9595, 02/5055 9520

FX Options

They represent the right – without obligation – to purchase/sell the underlying asset (i.e. foreign currency) at a given date and agreed exchange rate. The price of this right is the option price, which depends on the agreed settlement exchange rate (strike), period of time, and volatility of exchange rates and interest rates in respect of the currencies involved.

FX Options types:
  • call option – the right – without obligation – to purchase the principal currency at a fixed exchange rate
  • put option – the right – without obligation – to sell the principal currency at a fixed exchange rate
FX Options types by excercise:
  • European option type – the right can be exercised only at the predefined expiration date.
  • American option type - the right can be exercised at any time prior to the expiration date.

The advantage of options is their flexibility and 100% security at the required level, with the possibility of further use of exchange rate fluctuations. Minimum contract amount is EUR 100 000 or equivalent in another currency.

Conditions

Framework Derivatives Agreement signed

Contact

Corporate Sales
02/5055 9650, 02/5055 9630, 02/5055 9620, 02/5055 9610, 02/5055 9595, 02/5055 9520

Structured Products

Structured Products help clients to hedge the FX risk using combination of all relevant standard financial instruments such as forwards, options, etc. These products are tailored to client´s needs.

Conditions

Framework Derivatives Agreement signed

Contact

Corporate Sales
02/5055 9650, 02/5055 9630, 02/5055 9620, 02/5055 9610, 02/5055 9595, 02/5055 9520




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