‘Discount forward’ for hedging euro/sterling
Background: Many clients would like to use vanilla options to hedge their exposure, but believe they are too expensive. They feel safest when using FX forwards, despite the lack of flexibility such a contract provides. The discount forward provides all the protection of a forward contract at a better rate than the outright forward, with the possibility of receiving a vanilla option for a large discount.
Problem: A UK corporate client whose main business is importing from Europe is therefore a
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