Knock-In Forward

Also known as Forward Plus, Forward Extra

The Knock-In Forward is a simple and yet efficient hedging strategy that offers a worst case guaranteed strike rate.

The client has the right but not the obligation to hedge at this rate provided that spot does not trade at or beyond a pre-determined Knock-In Rate. Else, the client is locked into a synthetic forward rate obligation at that strike rate.

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.

  • The profit on the derivative will fully net off against the loss on the underlying exposure.

• Between the Strike and above the Knock-In Barrier, the client can participate in the favourable movement and transact at the improved Spot Rate.

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