# EAKO User Guide

www.eakocapital.com

This User Guide introduces a number of commonly traded FX structured forwards, with graphical representations provided to aid the reader.
**Derivative Payoff Profile**** **maps the payoff of the strategy to changes in the underlying asset.
**Net Exposure Profile **reports the net profit of the strategy when combined with the underlying exposure.

## Derivative Payoff Profile

As the underlying currency pair (e.g., EURUSD) moves from left to right along the x-axis, this diagram reports the payoff of the strategy as being either:

A positive profit value if above the x-axis.

A negative loss value if below the x-axis.

Neither a profit, nor a loss if on the x-axis.

**Payoff Diagram:**

## Net Exposure Profile

Maps the derivative to the underlying exposure.

As the underlying currency pair (e.g., EURUSD) moves from left to right along the x-axis, an unhedged position would see its exposure moving up the y-axis in a one-for-one relationship. This is represented by the 45 degree upward sloping line, labelled "*Exposure = Spot*".

In contrast, a FX Forward fixed at-the-market-forward (ATMF) rate would report the same single rate on the y-axis for all movements in the underlying rate. This is represented by the dotted horizontal line labelled "*Exposure = Forward"*.

**Payoff Diagram:**

The following diagram combines the Profit Payoff Profile of the above Knock-In Forward with that of the underlying Spot position.

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