Currency Options

Currency Options is a banking service allowing the customer to hedge against future changes in the currency exchange rate. By buying a Currency Option, the customer has the right, but no obligation to make currency conversion according to a previously established exchange rate on a specified date. The customer or the party purchasing the option pays a premium (option price) to the bank or the party that guarantees performance of obligations.

Currency Options are convenient if the customer's incoming and outgoing cash flows are in different currencies and the dates and amounts of such cash flows can be previously estimated. Currency Option grants the right to its owner but does not incur an obligation to perform currency exchange if the exchange rate fluctuations are not favourable for the customer. The amount of the option price or premium is calculated depending on instability of the currencies involved, the exchange rate established for the deal, exchange rate differences of the currencies involved, maturity of the deal, etc. The right to buy currency in the future is called a call option for such currency, while the right to sell a currency is a put option for such currency.

Possibilities:

• Hedge currency risks,
• Use the right to perform currency conversion in the future according to a pre-established exchange rate,
• Avoid responsibility to perform currency conversion according to a pre-established exchange rate,
• Perform currency option transactions issuing instructions by telephone.

To use options, you have to:

• Open a Salary Account or Private Account with Swedbank,
• Sign a "General Agreement On Transactions With Options" with the bank.