FX Forward (Foreign Exchange Forward)
FX Forward (Foreign Exchange Forward) refers to the transaction whereby a customer reaches an agreement for forward settlement and sale of foreign exchange with the bank. Under the agreement, the currency type, amount, term and foreign exchange rate of foreign exchange settlement and sales in the future are agreed by both parties, and on the due date in the future, the transaction mentioned above will be settled according to the specified terms.
Using FX Forward deals, the customers can fix the exchange rate at the settlement date, hedge the exchange rate risk and lock up the trade cost or money cost. But at the same time they also forgo any profit under the scenario whereby the exchange rate moves in a direction in their favor.
RMB IRS (RMB interest rate swap)
RMB IRS (RMB interest rate swap) is a financial contract between the Bank and the customer under which the Bank’s future interest payments is exchanged for customer"s based on the specified RMB principal and interest rate. Interest rate swaps often exchange a fixed payment for a floating payment or vice versa.
RMB interest rate swaps come in a huge number of varieties and can be structured in many ways depending on the requirement. RMB interest rate swaps are typically used for managing risk, or for wealth investment. Main purposes are:
(1) Match the terms of assets and liabilities, manage the basis risks between fixed rate and floating rate.
(2) Hedge against or profit from the fluctuation in interest rates, lower the financing cost or increase the investment return.
(3) By comparing all the options, obtain the lowest financing cost through interest rate swap.
(4) Use arbitrage opportunities to increase investment return by a portfolio of primary products and interest rate swaps.