Target redemption forward (TARF)
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A target redemption forward (TARF) allows you to benefit from an improved rate that is much better than the benchmark forward rate, as long as your bonus reserve is not exhausted. The principle is to define before booking the contract, a schedule of monthly or bi-monthly fixings and a bonus reserve expressed in number of "pips". At each observation, we will compare the spot rate to the improved rate. If the spot rate is less favorable than the improved rate, you can buy the notional amount at improved rate using your bonus reserve. If the spot rate is better than the improved rate, you don't use your bonus reserve and you have to buy an amount higher than the notional amount (at the defined ratio) at the improved rate. The strategy is deactivated when the bonus reserve is exhausted, or at expiry of the contract. The reserve is consumed based on the difference in pips between the spot price and the improved price observed at each fixing. Please note that this strategy does not offer a guaranteed protection price and you remain fully exposed to adverse exchange rate fluctuations.
Complexity level : 
Catégorie : 5 *
Guarenteed protection rate : No
Protection rate level against benchmark forward rate :
N/A
Amount dealt at expiry :
Potentially higher than the notional amount
In what market to use it ?
Participation in a favorable move in spot : No