# Risk Reversal / FX Collar
## Long Risk Reversal
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The collar is one of the most conservative forward hedges available. Through the combination of the buying and selling of a pair of OTM options, the Collar provides a hedge whereby the client's FX risk is locked within a "range", between a Guaranteed Strike Rate and a Best Case Rate .
The strategy may also be referred to as a Risk Reversal, Cap and Floor, Range Forward, or Corridor.
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**Payoff Diagram:**
### **Payoff at Expiry:**
At expiry if EURUSD fixes:
* Above the Call Strike, the client is fully protected at the Call Strike on 100% of the Notional. The profit on the derivative will fully net off against the loss on the underlying exposure.
* Between the Call Strike and the Put Strike, the client can participate in the favourable movement and transact at the improved Spot Rate.
* Below the Put Strike, the client will find itself obligated to trade at the Put Strike level on 100% of the Notional.
## Short Risk Reversal
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A Short Risk Reversal is a bearish strategy which involves the simultaneous sale of an OTM Call and a purchase of an OTM Put of the same expiration. This can be done for either a net credit or debit, depending on the strikes chosen.
{% endhint %}
**Payoff Diagram:**
### **Payoff at Expiry:**
At expiry if EURUSD fixes:
* Above the Call Strike, the client will find itself obligated to trade at the Call Strike level on 100% of the Notional.
* Between the Call Strike and the Put Strike, the client can participate in the favourable movement and transact at the improved Spot Rate.
* Below the Put Strike, the client is fully protected at the Put Strike on 100% of the Notional. The profit on the derivative will fully net off against the loss on the underlying exposure.
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