In Project Finance transactions, it is common for the borrower to request that hedging banks spread over time the mark-to-market value of a hedge that has been terminated or restructured. This spread is implemented through an adjustment to the fixed rate of the final project hedge. This situation typically arises in the following contexts: Refinancing, where certain hedging instruments are early terminated or, more commonly, novated by the existing hedging banks to the new he

Setting up a FX forward An FX forward transaction involves exchanging a flow in one currency with a counterparty for a flow in another currency at a future date more than two business days away (T+2 corresponds to a spot transaction). This foreign exchange contract only generates cash flows at maturity of the term when an exchange is made in each currency of the pair. For example, if I am a Dollar buyer / Euro seller, I receive a forward amount in USD and pay an amount in Eur

When companies are exposed to inflation, whether through their costs (labour, wages, construction costs, etc.), or through income (indexation of electricity sale contracts or rent, etc.), hedging against exposure to inflation can make a business plan watertight. Before a decision can be made as to the advisability or feasibility of hedging against inflation risk, a company in this situation needs to answer several questions: What is the source of exposure on the asset and lia

With the pronounced market volatility that is sometimes reminiscent of the period following the bankruptcy of Lehman Brothers in September 2008, the question of how to execute hedging instruments using OTC derivatives is particularly deserving of careful consideration.

To be able to deal in derivatives with a new customer, counterparties must compile a customer information file on this client, including extensive information for regulatory purposes.