[Fegu]

Key product features

• Variation of the Forward.
• No obligation to trade between two predetermined levels, called the “Base Rate” and the “Limit Rate”, respectively.
• The Base Rate is the worst case protection rate.
• The Limit Rate is the best possible exchange rate.
• Unlimited upside.
• Unlimited downside.
• Zero premium.

Product description/scenario

• The Collar is a variation of the Forward, with the difference that if spot at expiry is between the Base Rate and the Limit Rate the client has no obligation and can transact at prevailing market rates.
• This is a zero premium structure, also known as a Cylinder or a Risk Reversal.

Example trade profile


Payout profile at expiry


Payoff description

• If spot at expiry is:
– Above the Base Rate (1.4500) the client buys EUR 1mio in exchange for USD 1.45mio.
– Between the Base Rate (1.4500) and the Limit Rate (1.1800), client is free to transact at the prevailing spot rate.
– Below the Limit Rate (1.1800) the client buys EUR 1mio and pays USD 1.18mio .