Demand for target forwards has taken off in the past two years as liability managers look for more precise ways to manage their foreign exchange (FX) exposures. George Nunn and PK Sinha explore what these 'targeted' FX hedging tools can do and how to risk-manage them
The last few years have seen an explosion in the use of the 'target' family of foreign exchange (FX) products. Target forwards were first introduced in mid-2005 in response to the specific hedging requirements of Asian clients. The need for liability managers to meet their budgeted FX rates without losing the entire hedge at a barrier FX rate (as with traditional knock-out forwards) was the driver for the development of target forwards.
More on Foreign Exchange
Target redemption forwards declining in popularity for macro reasons
EC ‘forgets’ to mention sterling in letter defining forex contracts
Target redemption forwards with capped loss structure set for launch
CNT fixing will be a boon for Taiwan’s derivatives market
Sign up for Risk.net email alerts
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
Nominated for two technology awards
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.