Dynamic Foreign Exchange Risk Management Strategies

Transcription

1 Dynamic Foreign Exchange Risk Management Strategies February 2009 Expanding was the least we could do to connect you to the major world markets Philippe DELMOTTE Head of FX Sales Europe Daniel TARJANYI Senior FX Sales Pricing as of 24 th February 2009

2 FX Organisation ORGANISATION MODEL FX TRADING IN LIQUIDITY CENTRES FX DEDICATED SALES IN DISTRIBUTION CENTRES FX R&D IN LIQUIDITY CENTRES 2

3 FX Organisation in 3 time zones Europe Americas New York Stockholm Brussels Frankfurt Geneva Milan Madrid London Paris Moscow Warsaw Praha Budapest Bratislava Istanbul Kiev Bahrain Asia / Pacific Seoul Taipei Shanghai Mumbai Bangkok Tokyo Hong Kong Middle East- Africa Singapore Sao Paulo Johannesburg Liquidity Centre Distribution centre 3

4 FX Organisation BASED ON 4 EQUILIBRIUMS CLIENT SEGMENTS (FI & CORP) CLIENT LOCATIONS (EQUILIBRIUM BETWEEN REGIONS) CASH v. DERIVATIVES PRODUCTS SCOPE STRONG CASH & DERIVATIVES TRADING PLATFORMS (LIQUIDITY) 4

5 FX Organisation Based on 2 Axes of strenght 2009 EMERGING MARKETS GLOBAL PLAYER (Asia / CEE / MENA / Latam) MENA (Middle-East North-Africa) DERIVATIVES HEDGING LIABILITY INVESTMENT 5

6 FX and CEE a growing area at Calyon Calyon s Global FX is Client Focused 80% 70% 60% 50% 40% 30% Calyon CEE Share FX Market Growth Calyon FX Growth 20% 10% 0% More than Client Transactions in Solution-Driven Transactions last year, representing 20% in terms of USD Volumes In 2008: CEE represented 30% and FX rose 60% 6

7 FX Hedging Strategies Buyer of EUR against HUF 7

8 Schedule and Objectives Customer wishes to hedge its FX exposure as a buyer of EUR against HUF. Objective: Minimize the cost of the EUR purchases compared to the outright forward rates by undertaking modest risk. Products: Outright Forward Vanilla Option Zero Cost Collar Visa Zero Cost Option 8

9 Outright Forward Parameters: Spot reference: Tenor: 6 months EUR/HUF Spot Strategy: This Forward takes a view that the EURHUF Spot Rate will fix above at maturity Workings of the product Settlement: At maturity: Customer buys EUR at against HUF Analysis Advantages: If EURHUF fixes above at maturity, customer can buy EUR at a rate as low as Cons: If at maturity EURHUF fixes below customer must buy EUR at a higher rate than actual spot rate. 9

10 Vanilla Option Parameters: Spot reference: Forward: Tenor: 6 months EUR/HUF Spot Strategy: This Option takes a view that the EURHUF Spot Rate will fix above at maturity Workings of the product Settlement: At maturity: If EUR/HUF Spot rate > Customer buys EUR at against HUF Customer pays 5.67% of EUR notional as a premium Analysis Advantages: Cons: If at maturity EURHUF fixes above , Customer can buy EUR at a rate as low as If at maturity EURHUF fixes below , Customer can choose not to participate in the product. Customer has to pay 5.67% of notional as a premium. 10

11 Zero Cost Collar Parameters: Spot reference: Forward: Tenor: 6 months EUR/HUF Spot Strategy: This product takes a view that the EUR/HUF Spot Rate will fix above at maturity Workings of the product Settlement: Analysis At maturity: If EUR/HUF Spot rate > Customer buys EUR at against HUF If < EUR/HUF Spot rate Customer buys EUR on Spot against HUF If EUR/HUF Spot rate Customer buys EUR at against HUF Advantages: Cons: If EUR/HUF fixes above at maturity, Customer can buy EUR at a better rate than actual spot. Capped Solution: Customer never buys EUR for more than If at maturity EUR/HUF fixes below , customer must buy EUR at a higher rate than actual spot rate. However, in this case customer still saves 2.50 HUF on each EUR compared to the outright forward. 11

12 Visa Zero Cost Option Parameters: Spot reference: Forward: Tenor: 6 months EUR/HUF Spot Strategy: This Option takes a view that the EUR/HUF Spot Rate will fix above at least once during the entire tenor at a time when customer needs to buy EUR Workings of the product Settlement: Customer can buy the whole of the Notional amount or a part of it at whenever and as many times as he wishes during the entire tenor. At maturity, if the Customer has not used yet the whole of the Notional Amount, he must buy the outstanding notional at Analysis Advantages: Each time EUR/HUF fixes above during the entire tenor, Customer can buy EUR at a better rate than actual spot. Each time EURHUF fixes below during the tenor, Customer can choose not to participate in the product. Cons: If at maturity the Customer has outstanding notional and EUR/HUF fixes below , customer must buy EUR at a higher rate than actual spot rate. 12

13 FX Hedging Strategies Seller of EUR against HUF 13

14 Schedule and Objectives Customer wishes to hedge its FX exposure as a seller of EUR against HUF. Objective: Minimize the cost of the HUF purchases compared to the outright forward rates by undertaking modest risk. Products: Outright Forward Vanilla Option Zero Cost Collar Visa Zero Cost Option 14

15 Outright Forward Parameters: Spot reference: Tenor: 6 months EUR/HUF Spot Strategy: This Forward takes a view that the EURHUF Spot Rate will fix below at maturity Workings of the product Settlement: At maturity: Customer sells EUR at against HUF Analysis Advantages: If EURHUF fixes below at maturity, customer can sell EUR at a rate as high as Cons: If at maturity EURHUF fixes above customer must sell EUR at a lower rate than actual spot rate. 15

16 Vanilla Option Parameters: Spot reference: Forward: Tenor: 6 months EUR/HUF Spot Strategy: This Option takes a view that the EURHUF Spot Rate will fix below at maturity Workings of the product Settlement: At maturity: If EUR/HUF Spot rate < Customer sells EUR at against HUF Customer pays 5.7% of EUR notional as a premium Analysis Advantages: If at maturity EURHUF fixes below , Customer can sell EUR at a rate as high as If at maturity EURHUF fixes above , Customer can choose not to participate in the product. Cons: Customer has to pay 5.67% of notional as a premium. 16

17 Protection of the Budget Rate Parameters: Spot reference: Tenor: 6 months Budget Rate: EUR/HUF Spot Strategy: This Option takes a view that the Customer wants a Protection of his Budget Rate at Workings of the product Settlement: At maturity: If EUR/HUF Spot rate < Customer sells EUR at against HUF Customer pays 1.2% of EUR notional as a premium that is only EUR 12,000 for a notional of EUR 1,000,000 Analysis Advantages: If at maturity EURHUF fixes below , Customer can sell EUR at a rate as high as and overperforms his Budget Rate. If at maturity EURHUF fixes above , Customer can choose not to participate in the product and overperforms his Budget Rate. Cons: Customer has to pay 1.12% of notional as a premium. 17

18 Zero Cost Collar Parameters: Spot reference: Forward: Tenor: 6 months EUR/HUF Spot Strategy: This product takes a view that the EUR/HUF Spot Rate will fix below at maturity Workings of the product Settlement: Analysis At maturity: If EUR/HUF Spot rate < Customer sells EUR at against HUF If < EUR/HUF Spot rate Customer sells EUR on Spot against HUF If EUR/HUF Spot rate Customer sells EUR at against HUF Advantages: Cons: If EUR/HUF fixes below at maturity, Customer can sell EUR at a better rate than actual spot. Capped Solution: Customer never sells EUR for less than If at maturity EUR/HUF fixes above , customer must buy EUR at a higher rate than actual spot rate. However, in this case customer still saves 1.30 HUF on each EUR compared to the outright forward. 18

19 Visa Zero Cost Option Parameters: Spot reference: Forward: Tenor: 6 months EUR/HUF Spot Strategy: This Option takes a view that the EUR/HUF Spot Rate will fix below at least once during the entire tenor at a time when customer needs to sell EUR Workings of the product Settlement: Customer can sell the whole of the Notional amount or a part of it at whenever and as many times as he wishes during the entire tenor. At maturity, if the Customer has not used yet the whole of the Notional Amount, he must sell the outstanding notional at Analysis Advantages: Each time EUR/HUF fixes below during the entire tenor, Customer can sell EUR at a better rate than actual spot. Each time EURHUF fixes above during the tenor, Customer can choose not to participate in the product. Cons: If at maturity the Customer has outstanding notional and EUR/HUF fixes above , customer must sell EUR at a lower rate than actual spot rate. 19

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