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FX Forwards

WSFS Bank provides market expertise and hedging solutions to help organizations and individuals manage their currency risk. Our team of experts dedicates time to understanding our customers’ needs; we structure hedging plans and products according to those specific needs.

Forward Exchange Rate Agreements (forwards) are among the tools used to hedge currency risk. A forward is a derivative product to protect against unfavorable movements in foreign currency. It locks an amount and exchange rate for a future date. It is also a cost-effective way to match currency risk to your cash flows.

Forward Rates

  • Driven by the market.
  • Calculated using the interest rate differential of the countries for which the currencies are being exchanged.

FX Forward Use Cases

  • Customers purchasing goods and services from foreign vendors and paying in foreign currency.
  • Customers selling goods and services in foreign markets and getting paid in foreign currency.
  • Organizations receiving dividends or royalties in foreign currency.
  • Businesses wanting certainty on the cost of foreign currency payments and receipts.

Four Types of Forwards

  • Outright forwards – Executed for a specific settlement date. Contractual obligation to transact.
  • Window forwards – Executed for a date range (can then be settled on a date within that range). Contractual obligation to transact.
  • Non-deliverable forward – No delivery of foreign currency takes place, always net settled in USD. Executed for exotic currencies where no tradable forward market exists. Contractual obligation to transact.
  • Participating forwards – Unlike a traditional forward, there is no contractual obligation to transact. It provides the benefits of an option without the cost of a premium. It offers protection on adverse movement in currency and allows the purchasers to benefit from favorable moves on participated amount.
Investment Products: Are Not FDIC Insured | May Lose Value | Are Not Bank Guaranteed

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