Foreign exchange products

Come and get to know Discount Bank's foreign exchange products

What is the difference between a spot transaction and a forward transaction, and what are forex options?

Forex transactions are transactions that are designed to serve clients who have different goals: some seek to hedge the risk and exposure to flow, loans, or investments, while others try to profit from market volatility or interest rate differences in currencies.

Our clients include importers and exporters, institutional entities, private investors, as well as local, foreign, and central banks.

Spot transaction

An exchange transaction (buy/sell) between two currencies at an agreed-upon rate and at a predetermined amount. The exchange of funds takes place after 2 business days.

Forward deal

An exchange transaction between two currencies, at an agreed-upon rate and at a specified amount, to be executed on an agreed-upon date. The transfer of the funds will be carried out at the time of completion of the transaction, regardless of the exchange rates that will prevail at the time of the execution of the transaction. The forward rate is calculated based on the spot rate plus the interest rate differences between the currencies for the transaction period.

Fx Swap transaction

A transactions with two legs – short and long. The two "legs" are carried out at the same time, opposite to each other, on a pair of currencies: in one transaction, currency A is sold or bought against currency B, and at the same time currency A is bought or sold against currency B for a future date and at a pre-agreed price.

Forex options

A contract that constitutes a right or an undertaking to buy or sell a fixed amount of a certain currency for another currency on a date that was set in advance.

Vanilla options – the basic options. It is customary to carry them out as European, that is – realization of the options at the end of the period.

Exotic options – these options are identical in their features to regular (vanilla) options, but they allow the premium to be reduced by limiting the protection through the introduction of certain conditions to the option. These conditions can only be met in the event that the spot rate touches the trigger (knock out / knock in) that is determined when the option is tied.

Additional options and strategies – digital options, cylinder, increasing or decreasing margin, leveraged forward extra, and more.

Each option contract has two sides:
The buyer of the option – holds the right, but not the obligation, to buy or sell the underlying asset. In exchange for this right, the buyer pays a premium to the seller (writer) of the option, so that the buyer's loss is limited to the amount of the premium, which is defined and known in advance.

The seller (writer) of the option – undertakes the obligation to buy or sell the underlying asset, according to the buyer's demand at a time that is determined in advance. The profit is limited to the amount of the premium that the seller receives, and the risk is unlimited if the exchange rate moves against the seller.