# EAKO User Guide

{% hint style="info" %}
This User Guide introduces a number of commonly traded FX structured forwards, with graphical representations provided to aid the reader.\
\
[**Derivative Payoff Profile**](#derivative-payoff-profile) maps the payoff of the strategy to changes in the underlying asset.\
\
[**Net Exposure Profile** ](#net-exposure-profile)reports the net profit of the strategy when combined with the underlying exposure.
{% endhint %}

## 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:**

<figure><img src="/files/RheX1wXJKCbsCfL13xl2" alt="How to read a Derivative Payoff Profile that shows how profits and losses arise"><figcaption></figcaption></figure>

## 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:**

<figure><img src="/files/f3rJjQGCQVLUgg93CmcW" alt="How to read a net profit payoff diagram"><figcaption></figcaption></figure>

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

<figure><img src="/files/YXmjKIAX71f2SgZkHMvI" alt="Example of how two payoff profiles combine to produce a net profit payoff"><figcaption></figcaption></figure>


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