American FX forward

• Potential profit or loss from transactions denominated in foreign currencies is affected by exchange rate fluctuations
• In theory, profits or losses are not limited in any way

• Client and its bank enter into an American FX Forward with client selling EUR 1 mil to buy CZK
• Agreed exchange rate: 27.950
• Client undertook two exchange transactions – EUR 500,000 each
  
  As of the first settlement, the spot exchange rate amounted to 27.900
• Client hedged its currency risk and also generated profit of CZK 25,000
  
  As of the second settlement, the spot exchange rate amounted to 28.000
• Client incurred a loss of CZK 25,000; however, this loss represents hedging cost, provided the transaction was used as hedging
• Hedging protects the client from a significant change in exchange rate that causes them serious financial problems.

The example provided is for illustrative purposes only and is intended to describe the functioning and use of the product. It does not represent past or expected future market developments.

Warnings  

This document does not represent an investment recommendation under Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse. Moreover, nor does it represent investment advice pursuant to Act No. 256/2004 Coll., on Capital market undertakings, as amended. The information specified herein shall not be considered an offer to purchase or sell any investment instrument or any other solicitation or invitation regarding the purchase or sale thereof.  

By law, Komerční banka, a. s. may not provide legal or tax advice. Before investing, clients should carry out their own risk analysis in terms of legal, tax, and accounting consequences, without relying solely on the information included in this document and, if necessary, consult tax or other advisors.  

Komerční banka, a. s. assumes no liability for damage incurred as a result of the use of this document or any information contained herein in excess of any liability foreseen by the applicable legislation. Each investor shall adopt their own informed decision regarding the investment suitability, as the investment instrument specified herein may not be suitable for all investors.

Past performance of investment instruments is not necessarily indicative of future performance. Expected future performance depends on premises that may not materialise. Investment instruments and other investments are associated with different investment risks, whereas investments may fluctuate in value and even the initially invested amount may not be fully recovered. Furthermore, investment instruments denominated in other foreign currencies are also exposed to risks arising from changes in foreign exchange rates, with potential positive or negative impact on investment instrument prices and consequently the investment returns.  

Employees of Komerční banka, a.s. and of other companies of the same financial group, including their close persons and authors of this document, may – from time to time – trade in or hold the investment instruments described herein or derivatives derived therefrom. This document shall not be binding on Komerční banka, a.s. or other companies of the same financial group in connection with the provision of their investment services to their clients.  

This document has been issued by Komerční banka, a. s. – i.e. a bank and an investment firm within the meaning of the applicable legislation. As such, it is subject to supervision by the Czech National Bank.  

This site containing investment products and insurance-based investment products is not intended for citizens or residents of the United States of America (USA) or for any “U.S. Person”, as defined in SEC Regulation S under the U.S. Securities Act of 1933. The investment products and insurance-based investment products described on this website are not registered under the U.S. federal securities laws or any other relevant U.S. state laws. Consequently, no investment products or insurance-based investment products may be offered or sold directly or indirectly in the USA, to or for the benefit of residents and citizens of the USA and/or U.S. Persons. This restriction also applies to residents and citizens of the USA and U.S. Persons who may access this website while outside of the USA.  Hedging protects clients from significant exchange rate fluctuations that could result in substantial financial problems

• Instrument for hedging currency risk resulting from potential adverse development of specific currency pairs
• Modification of the FX forward that allows continuous drawing on agreed nominal based on client’s needs
• Intended for individuals and legal entities, both Czech and foreign residents
• Available in any currency shown in the KB currency table
• Transactions executed by telephone with our dealers
• Receive notification of agreed transaction parameters following each transaction
• Counterparties agree and approve standard parameters – currency pair, nominal, and settlement date
• American FX forward buyer may also request partial exercise anytime between the initial date and the settlement date
• If a buyer does not exchange the entire nominal prior to the American FX Forward settlement date, the remaining nominal is automatically settled on such date
  
  

• Consult the Markets in Financial Instruments Directive
• Receive current information about financial market developments