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 enters into a currency forward with its bank
• Client sells EUR 1 million, buying CZK, with transaction settlement in a month
• Agreed exchange rate: 27.950
  - As of the settlement date, the current spot exchange rate is 28.000
  - If executed as speculation, the client incurred a loss of CZK 50,000
  - If executed as hedging, the client views the loss as the cost of hedging
  - Hedging protects clients from significant exchange rate fluctuations that would result in their serious financial problems
  
  

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. 

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• Purchase or sell one currency for another one at an exchange rate agreed by the transaction parties in advance
• Intended for individuals, legal entities, and municipalities – both Czech and foreign
• Transaction settlement with a forward value date (i.e. more than 2 business days from the trade date)
• FX forwards are available in all currencies listed in the KB currency table
• FX forwards may be combined with outgoing clean payment, documentary collection or documentary letter of credit transactions
• Transaction is concluded over the telephone with Sales dealer or online using the KB eTrading application
• Receive transaction confirmation of each transaction for verification purposes – with key transaction parameters; for KB eTrading transactions, the parameters of executed transactions are archived directly in the application
• Team of experienced professionals, who can propose suitable hedging strategies and respond quickly to market developments, at your service

Available modifications 

Non-deliverable forward

• Currency forward, where the actual exchange of amounts in purchased/sold currencies does not take place
• Counterparties agree on settlement in one of the two currencies of the relevant currency pair – so–called reference currency
• One or two business days (depending on the given currency) prior to the transaction settlement, the settlement amount in reference currency is calculated based on the difference between current spot exchange rate and previously agreed forward exchange rate
• Net position is then settled in the reference currency – by the short (by the party in disadvantageous position) party

Par forward

• Set of currency forwards that differ in a single parameter – maturity date

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