Derivatives trade Details of FWD points

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Presentation transcript:

Derivatives trade Details of FWD points

Bullet points Theory of OTC derivatives What differs Forwards from others Details of FWD points

Theory of OTC derivatives There are two doors for Derivatives users HEDGING Speculation

Theory of OTC derivatives FWD supply demand price

What defines OTC – FWD? FWD O ver T he OTC C ounter Exchange listed Size No front payment Forward Futures Swap =spot + Rate Forward Flex, custom Option OTC option Date Obligation

Details of FWD points FWD points FWD rate = Spot + FWD rate - Spot = = (spot, IR$, IRT) FWD rate - Spot = FWD rate = Spot + Considered as cost

Details of FWD points = Spot*(IRT-IR$)*T/365 = (spot, IR$, IRT) Spot USDMNT spot rate IR$ Interest rate for USD products IRT Interest rate for MNT products T Forward contract duration

Details of FWD points IR$ Interest rate for USD products IR margin IRT Interest rate for MNT products Deposit rates IR Customer Value base 16.2% Collateral size 15.5% 14.0% Market timing 12.5% Attractive size Competition Matching interest 12M Value 50% Policy rate decision

Details of FWD points 13.50% 16.20% BID ASK MNT loan / USD deposit 22.00% BID ASK 16.50% 13.50% 5.50% 16.20% USD purchase / USD deposit 15.00% 9.50% 5.50% MNT deposit 15.00% 15.00%

Example: Ex. 2 – 6M FWD Ex. 1 – 12M FWD Ex. 3 – 3M FWD Date: 28-Jun-2015 Official rate: 1944.46 Spot rate: 1945.00 IR margin BASE: 10.20% Date: 28-Mar-2015 Official rate: 2046.21 Spot rate: 2050.00 IR margin BASE: 11.80% Date: 28-Sep-2015 Official rate: 1996.76 Spot rate: 2000.00 IR margin BASE: 13.17% 6M @120.95 12M @263.36 3M @49.725 Today 2280.00 FWD points = 2000 * (13.17%) = 263.36 FWD points = 1945 * (10.20%) * 3 / 12 = 49.725 FWD points = 2050 * (11.80%) * 6 / 12 = 120.95 FWD 2170.95 FWD 1999.725 FWD 2263.36 Trade PnL: 109.05 MNT cost save: 215.25 USD opportunity: -62.70 Worth: 261.60 Trade PnL: 16.64 MNT cost save: 420.00 USD opportunity: -125.4 Worth: 311.24 Trade PnL: 280.275 MNT cost save: 102.11 USD opportunity: -31.35 Worth: 351.035

THANK YOU FOR YOUR ATTENTION START NEGO-TIATING DO THE MATH TAKE YOUR TIME THANK YOU FOR YOUR ATTENTION