A foreign exchange forward transaction means an agreement between two counterparties to exchange an agreed amount of one currency into other currency on a specific future date at the exchange rate agreed at the time entering into the transaction.

If your company has purchased or sold goods on terms of deferred payment, or needs to lock in the price for an extended period of time, then a foreign exchange forward transaction will protect the company’s income or expenses from exchange rate fluctuations, enable locking in of the product price or business profit, as well as allowing to avoid loss.

Possibilities

• keeping the company safe from unfavourable exchange rate fluctuations
• locking in expenses and the bid price
• agreeing the exchange rate on the day of the business transaction and having that exchange rate in force on the selected future date
• planning the company’s total income and expenses irrespective of exchange rate fluctuations

Currency exchange transaction risks

• the exchange rate agreed in the transaction remains in force until complete settlement of the transaction amount
• at maturity, the exchange rate then prevailing on a specific market may be more favourable than the one agreed in the transaction

Collateral

The need for collateral is assessed on case-by-case basis and depends on the duration of transaction and currencies involved in the transaction.

Further information about this service is available by phone on 67 444 141.

Requirements

• have a current account with Swedbank
• enter into Agreement for Financial Market Transactions with the bank
• enter into the Traderoom Use Agreement

Currency exchange swap transactions, or FX swap, are an effective cash management instrument. If your company expects settlements in one currency but has funds available in other currency, you can, until the necessary currency arrives in the account, borrow it in exchange for other currency not necessary at that time. The FX swap transaction does not do away with the need for the currency in question, however it helps to efficiently manage incoming and outgoing cash flows in different currencies.

Possibilities

• buying (selling) currencies at an agreed rate with an immediate settlement
• reselling and repurchasing the same amount of currency on a future date at the rate agreed at the time of transaction

The exchange rates are set at the time of entering into transaction and are binding on both counterparties until completion of the transaction.

Benefits of FX swaps

• a chance to temporarily borrow the necessary currency until it arrives in the account against other currency available in the account and not needed at that time
• a chance to keep the company safe from unfavourable exchange rate fluctuations and potential losses
• a chance to move the maturity date of foreign exchange forwards or already existing forex swaps, or manage incoming and outgoing cash flows in different currencies

FX swap transaction risks

• the exchange rate agreed in the transaction remains in force until complete settlement of the transaction amount
• at maturity, the exchange rate then prevailing on a specific market may be more favourable than the one agreed in the transaction

Collateral

The need for collateral is assessed on case-by-case basis and depends on the duration of transaction and currencies involved in the transaction.

Further information about this service is available by phone on 67 444 141.

Requirements

• have a current account with Swedbank
• enter into Agreement for Financial Market Transactions with the bank
• enter into the Traderoom Use Agreement

Foreign exchange options, or FX options, are contracts which give your company the right, without an obligation, to exchange currency on a certain future date at the exchange rate and in the amount fixed at the time of entering into the transaction. Option transactions are entered into as a hedge against an unfavourable probable future event. The buyer pays the seller a premium to have such an opportunity.

FX option types

• Calloption entitles the holder to buy the underlying currency at the rate fixed in the transaction, thus hedging against the risk of a rise in exchange rate.
• Putoption entitles the holder to sell the underlying currency at the rate fixed in the transaction, thus hedging against the risk of a fall in exchange rate.

Possibilities

• keep the company safe from unfavourable exchange rate fluctuations and potential losses
• benefit from favourable exchange rate fluctuations
• locking in the maximum expenses and the bid price
• select the ceiling or floor level of exchange rates

FX option transaction risks

• the paid premium is not refunded if the option is not exercised during the period covered by the transaction
• in case of early termination of the transaction, the customer may incur expenses or earn income, the size of which depends on forex market situation then prevailing

Collateral

The need for collateral is assessed on case-by-case basis and depends on the duration of transaction and currencies involved in the transaction.

Further information about this service is available by phone on 67 444 141.

Requirements

• have a current account with Swedbank
• enter into Agreement for Financial Market Transactions with the bank
• enter into the Traderoom Use Agreement