Foreign currency exchange risk management
Foreign currency risk management forms part of a hedging approach undertaken by the majority of companies and is intended to reduce
risks by the use of financial instruments to protect against fluctuations in exchange rates. It is undertaken on the basis of the investment
objectives and the risk/reward profile which the company judges to be compatible with its activities.
FOREX PURCHASES OR SALES
Forex operations
- Forex transactions
The purchase or sale at market rates of one currency against another foreign currency or CHF. - Forex limit order
Our trading room will respond to your requirements from 7.45 am to 5.45 pm. Outside these times NISEBK will monitor developments relating to your buy and/or sell limit orders on all the main financial market places.
Forex options
- Vanilla options
An option is a contract which, for the payment of a premium, provides its holder with the right but not the obligation to buy (or sell) a pre-determined quantity of an underlying asset at a rate which is fixed in advance. - Sale of covered options
This sell option, called a "covered sale" is of most interest to the investor who:- has and operates with monetary deposits (whether term deposits or fiduciary investments)
- is seeking a clear increase in his return
- wishes to/is not averse to the idea of switching to another currency, whatever the currency of his initial deposit.
- Dual currency deposit
Dual currency deposits are money market transactions with an interest rate above that of a standard deposit. Its unique feature lies in the fact that the choice of the currency in which the capital is repaid is linked to an exchange rate. - BARRIER options
From the purchaser's point of view, these can be more advantageous than vanilla options as they are less expensive and also include knock-in and knock-out features. - ARO options
An Average Rate Option (ARO), also known as an "Asian option" is an option (call or put) the base price of which is compared with the average rate calculated over the complete averaging period. If the option is exercised, the holder receives the difference between the base price and the average rate.
