Financial risk management

Persons who receive and make payments in different currencies (e.g., receive funds in EUR and make payments in USD) are exposed to exchange rate fluctuation risk. For the purpose of management of this risk, the Bank offers currency exchange forwards, currency swaps and currency options.

Forward agreement is a transaction whereby the counterparties (you and Swedbank) undertake to buy or sell currency on a given future date at an agreed price. It provides a possibility to hedge against exchange rate changes with regard to both potential loss and potential profit from exchange rate fluctuations.

You know that you will need to buy or sell currency, but you don’t know what exchange rate will be at that time and how it will affect the cost price of your goods or services.

By concluding a forward agreement you can:

  • fix the exchange rate in advance;
  • plan income and expenses irrespective of exchange rate fluctuations;
  • avoid loss and restrain from potential profit due to exchange rate changes;
  • set an earlier or later date for execution of the forward agreement, if necessary (see currency swap).

How the forward works

By concluding a forward agreement you hedge against exchange rate fluctuations and save time, because you don’t need to continuously follow the currency market.

By concluding a forward deal you are exposed to risk that due to unfavourable exchange rates changes in future you will have to execute the transaction at the rate lower than the market rate and lose potential profit.

Main service provision conditions

  • In order to conclude a forward you need to enter into an agreement for derivative financial instruments traded on regulated markets (master agreement) and agreement for electronic services at the nearest Swedbank branch.
  • In order to conclude a forward you need an account with Swedbank.
  • The Bank imposes limits on transaction amounts. If you have no limit, you can conclude a forward agreement by providing collateral. The collateral amount is determined on a case-by-case basis and depends on the amount and term of the transaction.
  • The transaction can also be concluded via ‘Traderoom’ electronic trading channel.