What is amortizing forward?

With Akcenta, you can hedge your company against exchange rate risk for up to 1 year in advance as standard. We will prepare a tailor-made offer for each client.

An amortisation forward is based on the same principles as a standard forward, i.e. a precisely defined amount is hedged at a fixed rate with only the difference of a variable maturity date. The predetermined settlement date of the forward is replaced by an agreed period during which the exchange can be made at any time at the agreed rate.

Individual conversions need not be pre-specified, and may take place on any business day within the period and in any amount up to the total amount of the agreed amortising forward.

What are the advantages of amortizing forward?

All drawdowns during the term of the amortisation forward until maturity are at the originally agreed forward rate and at no additional cost. In the event that the full amount of the Amortising Forward is not drawn it is possible to swap and thus postpone the drawdown to a suitable time. When using a swap as an additional instrument, the client must take into account the cost of the difference in exchange rates adjusted by swap points.

If the client has difficulty estimating the timing and amount of future maturities of incoming payments or obligations, it may be appropriate for the client to use an amortising forward. In such a case, this instrument provides the client with maximum flexibility and the security of a fixed rate. This instrument also allows companies to make better use of the fixed rate in their financial planning calculations.

There are no fees for entering into an amortisation forward with us.

Example of amortizing forward

CLIENT EXPORTER

The client expects payments from foreign companies, which are to pay him a total of EUR 500,000 for the goods he has purchased within 12 months, i.e. by 31 December. He enters into a forward trade, which gives the client a forward exchange rate at which all currency conversions will be made until 31 December (forward exchange rate).

date of payment received	31.3.	20.5.	30.9.	31.12.
Negotiated rate	23,700	23,700	23,700	23,700
actual rate	23,850	23,750	23,600	23,650
reimbursement received	100 000	125 000	150 000	125 000
potential profit/loss in CZK	-15 000	-6 250	15 000	6 250

Communication of key information can be found here.

All drawdowns during the term of the amortising forward are at the originally agreed forward rate and at no additional cost.

If the conversion trade is not drawn down in full no later than the predetermined maturity date of the forward, it is possible to use a swap trade to postpone the settlement date of the whole or the undrawn portion of the forward, thus delaying its drawdown to an appropriate time. In this case, the originally agreed forward trade/portion of the forward trade will be revalued and a new forward trade will be entered into at current market values.

In case you are interested in this product and think that you would use it as an advantageous tool to reduce the risk related to your business, please do not hesitate to contact us.

What are the conditions for the forward?

Signing of a Framework Agreement for the provision of payment services and Amendment on the Provision of Investment Services.
You are legally obliged to have LEI number.
Deposit of cash collateral or getting a Dealing limit.
Minimum amount per transaction is EUR 30,000 or equivalent in another currency.
Interested in more? Read other terms and conditions.

By entering into currency derivative transactions, the client assumes some types of risks (market risk – currency and interest rate risks, counterparty risk, liquidity risk, leverage). Everything always depends on the purpose and method of use of the derivative transaction concerned. Before signing a Framework Agreement and closing a transaction or at any time on request, dealers will be glad to explain you the individual types of risks, whether orally or in writing.

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