Ratio range forward

A ratio range forward ratio allows you to secure a protection rate (less favourable than the benchmark forward rate), while allowing you to take 100% advantage of a favourable move in the spot rate at expiry, in the limit of the participation price. However, you may be obligated to buy an amount higher than the notional amount (at participation price and within the limit of the defined ratio) if the spot rate at expiry is higher than the participation price.

Complexity level :

:

Catégorie : 3 *

Guarenteed protection rate :

Protection rate level against benchmark forward rate :
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 :

Scenario 1
At expiry, if the spot rate is less favourable than the protection rate, you can buy the notional amount at protection rate.

Scenario 2
At expiry, if the spot rate is between the protection rate and the participation price, you are released from any obligation and you can therefore buy the amount of your choice at spot rate.

Scenario 3
At expiry, if the spot rate is better than the participation price, you must buy twice the notional amount at participation price.

Currency cross	EUR / USD
Side	Buy USD
Contract maturity	6 months
Benchmark forward rate	1,1030
Protection rate level	1,0850
Improved rate level	N/A
Readjusted rate level	1,135
Low barrier level	N/A
High barrier level	N/A
Participation rate	100%
Ratio	1 : 2
Reserve of points	N/A
Type of contract	N/A
Frequency of fixings	N/A
Frequency of deliveries	N/A
Fixing	10 am, New-York time

Advantages

Disadvantages