Forward contract implies to purchase or sale of a foreign currency where counterparts have agreed execution of the deal on a specific date in the future by the exchange rate fixed today. The forward price of a currency against BAM or another foreign currency is a product of the current market price (spot) and interest rate differential between involved currencies during agreed period.
The minimum amount of transaction is in the value or in other currency equivalent of EUR 50,000 with maximum tenor from 3 to 180 days.
- FX risk hedge. Taking a short position (forward sale) you are able to fix stocked commodity price, respectively taking a long position (forward purchase) to fix commodity purchase price.
- Client’s account is debited /credited on the day of deal execution.
- Deals are closed by the telephone and the FX Request/Confirmation, containing the agreed details: type of currency, rate, amount and account number is exchanged by fax.
- As a protection against default risk, client is bound to ensure special purpose deposit proportional to the contracted deal period and calculated as a percentage of the total value in BAM.
- On FX Forward maturity date, the bank shall inform the client about the completion, make the conversion and release the deposit from the client’s special purpose account.
Other details are agreed with the client directly.