1. Derivatives trade Details of FWD points

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

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

4. Theory of OTC derivatives
FWD
supply
demand
price

5. 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

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

7. 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

8. 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

9. 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%

10. Example: Ex. 2 – 6M FWD Ex. 1 – 12M FWD Ex. 3 – 3M FWD
Date: 28-Jun-2015
Official rate:
Spot rate:
IR margin BASE: 10.20%
Date: 28-Mar-2015
Official rate:
Spot rate:
IR margin BASE: 11.80%
Date: 28-Sep-2015
Official rate:
Spot rate:
IR margin BASE: 13.17%
6M @120.95
12M @263.36
3M @49.725
Today
FWD points = 2000 * (13.17%) =
FWD points = 1945 * (10.20%) * 3 / 12 =
FWD points = 2050 * (11.80%) * 6 / 12 =
FWD
FWD
FWD
Trade PnL:
MNT cost save:
USD opportunity:
Worth:
Trade PnL: 16.64
MNT cost save:
USD opportunity:
Worth:
Trade PnL:
MNT cost save:
USD opportunity:
Worth:

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