EAKO - User Guide
  • Guides
  • EAKO User Guide
  • Glossary
  • Strategies
  • Call Option
  • Put Option
  • Synthetic Forward
  • Extendible Forward
  • Risk Reversal / FX Collar
  • Participating Forward
  • Cap Loss Forward
  • Knock-In Forward
  • KIKO
  • Fade Forward
  • Ratio Knock-Out Forward
  • TARF
  • Liability Knock-Out TARF
  • EKI TARF
  • Pivot TARF
  • EKI Pivot TARF
  • Barrier Options
    • Introduction
    • Types of Barriers
    • Time Aspect
    • Knock-In
    • Knock-Out
    • Knock In Knock-Out
  • Variations on Barrier Options
    • Double Knock-In
    • Double Knock-Out
    • European Knock-Out
    • Knock-In European Knock-Out
    • Knock-Out European Knock-Out
    • Performance Knock-In
    • Performance Knock-Out
    • Partial Knock-In
    • Partial Knock-Out
    • Partial Double Knock-Out
    • Forward Knock-In
    • Forward Knock-Out
    • Forward Double Knock-Out
    • Forward Knock-In Knock-Out
    • Knock-Out with Rebate
    • Discrete Knock-Out
Powered by GitBook
On this page
  • Payoff Diagram:
  • Payoff at Expiry:

Extendible Forward

Extendibility is a feature that can be added to any strate

PreviousSynthetic ForwardNextRisk Reversal / FX Collar

Last updated 2 years ago

An Extendible Forward is a forward contract with the potential to be renewed for one or more expiries if the final spot rate ends above (or below) a pre-specified barrier. Variations of the extension test condition may position the extension test date at an earlier point in time. This would enable the hedging counterparty to know on that date whether or not the forward will extend into the second period.

Payoff Diagram:

Payoff at Expiry:

At expiry if EURUSD fixes:

  • Above the Strike, the client is fully protected at the Strike on 100% of the Notional.

  • Below the Strike, the client will find itself obligated to trade at the Strike level on 100% of the Notional.

On the Extension Test Date, if EURUSD is below the Extension Test Rate, the strategy will continue for a second period (the "Extension Period"); otherwise, it will not and the client will be unhedged for that second period.

Extendible Forward Payoff Profile