Foreign exchange-linked financial products

{}Posted in2023/2/25 4:59:13 | 7Browse

What is f cashback forexeign rebatesforexbroker-linked financial forexrebatecommission Foreign exchange-linked financial products are products whose buying and selling prices are closely related to the rise and fall of foreign exchange The bestforexrebatecompany of foreign exchange-linked financial products depends on the exchange best forex rebate company movement of one or more groups of foreign exchange, that is, the underlying is a group or groups of foreign exchange rates, such as the USD/JPY, EUR/USD, etc. Usually, the exchange rate of one or more groups of foreign exchange linked is mostly based on Tokyo time 3:00 p.m. in Reuters or Bloomberg corresponding foreign exchange display page price and determine the foreign exchange linked class financial products options split For most of the structure of foreign exchange-linked structured financial products form, is currently more popular is generally bullish or bearish, or range-type fxrebatecentral basically can have one or more touch points 1, a touch option a touch option strictly speaking refers to In a certain period, if the linked foreign exchange at the end of the period touches or exceeds the banks predetermined touch points, the buyer will be able to obtain the initial rate of return agreed between the two sides to foreign exchange-linked structured financial products in the bullish investment for example, the direction of the linked foreign exchange trend eventually in line with the investors bullish expectations, the investor will get the established potential return at the end of the investment period, otherwise the investor will get the minimum return (sometimes may be zero) ) Suppose A bank in the market issued an investment period of 3 months bullish USD / JPY products in accordance with the structure of the product, the bank will set a trigger rate, at maturity, if the final exchange rate closing price is higher than the trigger rate, the total return = guaranteed investment amount * (1 + potential return; otherwise (i.e., the final exchange rate is lower than the trigger rate), the total return = guaranteed investment amount * (1 + minimum return) 2. Two-way non-trigger option two-way non-trigger option refers to a certain investment period, if the linked foreign exchange in the entire period has not touched the buyers predetermined two touch points, the buyer will be able to obtain the return rate agreed between the two sides at the beginning of the foreign exchange-linked structured financial products in the range of investment for example, the direction of the linked foreign exchange trend eventually in line with the investors expectations of fluctuations in a fixed range, the investor will be at the end of the investment period Assume Bank B issues a 3-month range investment product in the market, pegged to the EUR/USD exchange rate According to the structure of the product, the bank will set two trigger rates, i.e. the upper trigger rate and the lower trigger rate During the entire investment period, if the exchange rate closes above the upper trigger rate or below the lower trigger rate Lower limit, the total return = guaranteed investment amount * (1 + minimum rate of return); otherwise, the closing price of the exchange rate always fluctuate within the upper limit of the trigger rate and the lower limit of the trigger rate, the total return = guaranteed investment amount * (1 + potential rate of return) 3, the actual case study Example: Bank B January 4, 2007 in the market issued an investment period of 3 months interval investment products, linked to the euro / U.S. dollar exchange rate, the specific (1) As long as the exchange rate remains within the specified trading range throughout the observation period, the investor will receive the potential return on the maturity date; (2) Even if the exchange rate is outside the specified trading range (equal to/below the lower limit of the exchange rate or equal to/above the upper limit of the exchange rate), the investor can get back the guaranteed investment amount; (3) The investment amount retrieved and the return received (if any) on the maturity date are settled in the base currency Table 1B Performance of the exchange rate in the case of bank financial products observation Total return on the maturity date 1, where the relevant exchange rate has remained within the specified trading range throughout the observation period Guaranteed investment amount + potential return 2, where at any time during the observation period the relevant exchange rate has been equal to/below the exchange rate floor has been equal to/above the exchange rate Reference example of guaranteed investment amount + minimum return The investor expects the exchange rate of EUR/USD to remain above 11472 but below 1125480 for a period of 3 months Investment type: Range investment, EUR/USD Base currency: USD Investment amount: USD 10,000 Investment amount guarantee ratio: 100% Initial exchange rate: EUR/USD 11950 Trading range: EUR/USD 11,472 (exchange rate floor) to EUR/USD 12,548 (exchange rate ceiling) (excluding the upper and lower limits of the exchange rate) Investment period: approximately 3 months Potential return (if any): 1.375% (annual return of approximately 5,5%) Minimum return (if any): 0 Risk-return analysis Based on the above example, assuming that the client holds the capital protected investment product until maturity, the total return available is calculated as shown in Table 2　　Table 2B Total return calculation for bank financial products Total return on the maturity date of the situation during the observation period Situation 1, the euro moves in line with the investors expectations Throughout the observation period, the EUR/USD exchange rate has remained within the established trading zone (i.e. above 11,472, but below 12,548) Guaranteed investment amount * (1 + potential return) = $10,000 * (1 + 1.375%) = 10137.5 USD Scenario 2, the euro moves contrary to the investors expectations At any time throughout the observation period, the EUR/USD exchange rate has been equal to/below the exchange rate floor or has been equal to/above the exchange rate ceiling (i.e. has reached 11472 or below, or has reached 12548 or above) Guaranteed Investment Amount = 10,000 USD Investment risk of foreign exchange-linked financial products Issuing foreign exchange-linked capital guaranteed financial products Banks issuing foreign exchange-linked capital protected products usually specify the possible investment risks in the subscription documents of the products, which are broadly listed as follows: Foreign exchange-linked capital protected products have investment risks and should not be considered as general time deposits or their substitutes Liquidity risk - as capital protected products have their own pre-determined investment period, investors should consider their Concentration risk - Investors should avoid over-concentration in any one type of investment product or in any one geographic area or industry to avoid a portfolio being overly influenced by any one investment risk Risk of return on principal-protected financial products - A principal-protected product is a product that is more likely to be invested in a similar market than a non-principal-protected product. Investors must be prepared to assume the risk of receiving a lower return on the money invested or possibly losing the interest they would have earned through deposits Risk of receiving the guaranteed investment amount at maturity - Investors should be aware that principal-protected products Capital is only guaranteed at maturity and no regular income will be earned until maturity Market risk affecting potential returns - any potential returns are not guaranteed and returns on capital protected investment products are dependent on market conditions Exchange rate risk - if used as a benchmark for investment Investors should be aware of the risk of loss due to exchange rate fluctuations if the base currency used for investment is not the investors usual local currency and needs to be converted to local currency. Risk of unsuccessful subscription of capital protected products - the bank has the full right to approve applications and may refuse to accept all or part of the capital protected products before the start date of the capital protected products Risk of investors own condition - an investor needs to assess his or her own condition before investing in the capital protected products. Investors need to assess their own situation, including their financial status, investment experience, professional knowledge, education level, risk appetite, risk tolerance, etc. The difference in investors own situation may lead to an increase in the risk they face when investing in principal-protected financial products or other differences, and investors need to fully understand and consider this risk

Popular Articles

Random Reading

Links