What is 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.

A forward contract is a basic type of currency hedge. It is an agreement for future purchase or sale of foreign currency at a fixed, set exchange rate completed at a previously established time in the future. The forward exchange rate is based on the spot rate, modified by so-called "forward points". These are determined by the duration of the period for which the forward contract has been arranged, and the difference in the interest rates of the traded currencies. With a fixed forward rate a company gains security and eliminates risks arising from future negative exchange rate trends. On the other hand, the company cannot profit from any positive trend for these exchange rates. For this reason it is appropriate to decide between insuring 100% of the trade or only a part of it.

There are no fees for completing a forward contract. Forwards can be set for a certain period (up to 1 year standard, or longer in individual cases). The number and amounts of such trades are unlimited. The trade becomes binding at the moment of completing the transaction.

What are the advantages of forward?

The main function of a forward is to hedge against adverse movements in the exchange rate of two currencies. Forward gives clients the opportunity to buy or sell a specified amount of foreign currency at the rate that is set when the trade is concluded, but with settlement in the future (normally within 1 year, individually longer is possible).

With a forward, the client gains security and fixes his trading margin against losses from any adverse exchange rate development on the foreign exchange market. He can thus fix the exchange rate within the calculation of his order. In addition, there are no fees for closing a forward contract with us.

Example of forward

Exporter: A company has agreed on a trade with an international company that is expected to pay EUR 100,000 for delivered goods in 3 months. The current (market) exchange rate for EUR/CZK is 23.80 and the forward rate for three months is 23.98.

EUR/CZK EXCHANGE RATE AT SETTLEMENT DATE	CZK VALUE WITHOUT FORWARD	CZK VALUE WITH FORWARD	POTENTIAL PROFIT/LOSS VS SPOT RATE AT SETTLEMENT DATE (IN CZK)
23.78	2 378 000	2 398 000	20 000
23,88	2 388 000	2 398 000	10 000
23,98	2 398 000	2 398 000	0
24,08	2 408 000	2 398 000	- 10 000
24,18	2 418 000	2 398 000	- 20 000

Communication of key information can be found here.

If the conversion trade is not executed/settled within the maturity of the forward on the predetermined settlement date, it is possible to postpone the settlement date by means of a swap trade, thus delaying its exhaustion to a suitable time. In this case, the originally agreed forward trade will be revalued and a new forward trade will be entered into at current market values.

If you are interested in this product and think that you would use it as a beneficial tool to reduce the risk associated with 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 10,000 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.