Forward extra plus

A forward extra plus allows you to secure a protection rate (less favourable than the benchmark forward rate), while allowing you to take 100% advantage of a favourable move in the spot rate at expiry, provided that the spot rate at expiry is not below the knock-in barrier. In this case, you must sell the notional amount at a readjusted rate, that is less favourable than the spot rate at expiry but better than the protection rate.

Complexity level :

:

Catégorie : 2 *

Guarenteed protection rate :

Protection rate level against benchmark forward rate :
Less favourable

Amount dealt at expiry :
Same as the notional amount

In what market to use it ?

Participation in a favorable move in spot :

Scenario 1
At expiry, if the spot rate is less favourable than the protection rate, you can sell the notional amount at protection rate.

Scenario 2
At expiry, if the spot rate is between the protection rate and the knock-in barrier rate, you are released from any obligation and you can therefore sell the amount of your choice at spot rate.

Scenario 3
At expiry, if the spot rate is below the knock-in barrier, you must sell the notional amount at readjusted rate. This readjusted rate is better than your initial protection rate but less favourable than the spot rate at expiry.

Currency cross	EUR / USD
Side	Sell USD
Contract maturity	6 months
Benchmark forward rate	1,109
Protection rate level	1,1275
Improved rate level	N/A
Readjusted rate level	1,1090
Low barrier level	1,0800
High barrier level	N/A
Participation rate	100%
Ratio	1 : 1
Reserve of points	N/A
Type of contract	European
Frequency of fixings	N/A
Frequency of deliveries	N/A
Fixing	10 am, New-York time

Advantages

Disadvantages