A ratio boosted forward allows you to secure a protection rate (slightly less favourable than the benchmark forward rate) while allowing you to benefit from an improved rate, provided that one or the other of the two barriers are not touched during the lifetime of the contract. This improved rate is much better than the initial protection rate and better than the benchmark forward rate. However, you may be obligated to buy an amount higher than the notional amount, at protection rate or at improved rate (depending on the case), within the limit of the defined ratio.
Complexity level : 
:
Catégorie : 3 *
Guarenteed protection rate : 
Protection rate level against benchmark forward rate :
Slightly less favourable
Amount dealt at expiry :
Potentially higher than the notional amount
In what market to use it ?
Participation in a favorable move in spot : No
Hypothesis A : If during the lifetime of the contract, neither of the two barriers have been touched:
Scenario A1
At expiry, if the spot rate is less favourable than the improved rate, you can buy the notional amount at improved rate.
Scenario A2
At expiry, if the spot rate is better than the improved rate, you must buy twice the notional amount at improved rate.
Hypothesis B : If during the lifetime of the contract, one or other of the barriers have been touched:
Scenario B1
At expiry, if the spot rate is less favourable than the protection rate, you can buy the notional amount at protection rate.
Scenario B2
At expiry, if the spot rate is better than the protection rate, you must buy twice the notional amount at protection rate.
| Currency cross |
EUR / USD |
| Side |
Buy USD |
| Contract maturity |
6 months |
| Benchmark forward rate |
1,1030 |
| Protection rate level |
1,1000 |
| Improved rate level |
1,1325 |
| Readjusted rate level |
N/A |
| Low barrier level |
1.0590 |
| High barrier level |
1,1600 |
| Participation rate |
N/A |
| Ratio |
1 : 2 |
| Reserve of points |
N/A |
| Type of contract |
American |
| Frequency of fixings |
N/A |
| Frequency of deliveries |
N/A |
| Fixing |
10 am, New-York time |
Advantages
- You benefit from a guaranteed protection rate whatever the movements in the exchange rate
- You can benefit, under certain conditions, from an improved rate that is much better than the protection rate and better than the benchmark forward rate
Disadvantages
- The protection rate is slightly less favourable than the benchmark forward rate
- You cannot benefit from a favourable move in the spot rate
- You can benefit from the improved rate only if neither of the two barriers have been touched during the lifetime of the contract
- You may be obligated to buy an amount higher than the notional amount