What is a Participating Forward?

An agreement to set a 'worst case' exchange rate for a specified currency amount for an amount in different currency on the transaction settlement date. It offers the benefits of both protection and participation.

Benefits

  • Provides you with protection at a fixed, known protection rate.

  • Offers you potential gain from a favourable movement on the participating portion of the transaction amount.

  • There's no premium outlay.

Considerations

  • Your worst case fixed rate is less favourable than the equivalent forward rate.

  • Your gain potential is limited to the extent of the participating portion of the transaction amount.

  • You have an obligation to transact the fixed component at maturity and cancellation of the contract may incur a cost or benefit to you.

What else do I need to know?

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