A par forward is based on the same principles as a standard forward, i.e. a precisely defined amount is hedged by the fixed rate on the given date. It differs from standard forwards in that there is a possibility to make a series of multiple forwards with regular maturities. The final rate for all forwards in a given par forward series is determined by the average time weighted forward points for each maturity. Such a rate is usually more advantageous for the client than the average rate of standard forwards.
What's a par 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.
What are the advantages of par forwards?
In addition to the standard benefits of future exchange rate security, another benefit is the single exchange rate for all maturities. Therefore, the client does not receive a different forward rate for each maturity, as is the case with a series of standard forwards. On the contrary, in the case of regular foreign direct debits, the client has the possibility to use one hedging product instead of individual forward trades.
We charge no fees for entering into a par forward.
Example of par forward
CLIENT EXPORTER
The client expects payments from foreign customers to pay a total of EUR 600,000 for goods delivered in regular quarterly payments over a 12-month period, i.e. until 15 May 2024. By entering into the par forward, the client receives the assurance of an unchanging exchange rate in advance, at which all four currency conversions will be carried out successively until the final payment date.
Communication of key information can be found here.
Any drawdown during the par forward term is for the originally negotiated forward rate and at no additional cost.
If a conversion transaction is not carried out / settled within a single forward due date on a predetermined settlement date, the settlement date may be postponed by a swap transaction to postpone the drawdown for an appropriate period. In such a case, the originally arranged partial forward trade will be re-evaluated and a new forward will be concluded based on the current market rates.
What are the conditions for closing of par 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 200,000 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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The exchange rates shown are informative in nature; for the most up-to-date rates, please call +420 498 777 800. You can find current exchange rates in our Online Broker anytime.