In today's world, companies feel the need in risk hedging, flexible settlement terms with counterparties, and guaranteeing a minimum level of return on invested funds. All this can be done with the help of derivative financial instruments. Derivatives help turnover participants to control credit, interest, monetary, exchange risks arising in the course of their activities.
A derivative is a contract that establishes the right to buy, sell or exchange any underlying asset (currencies, securities, commodities and other similar financial instruments) on pre-determined terms. An investor acquiring a derivative obtains a contract that establishes its right to buy or sell in the future on pre-determined terms.
With PASHA Bank, companies can benefit from the following derivatives.
Forward
Forward is an agreement between parties outside of stock exchange and a liability to purchase or sell currency at agreed price in the future. There should be noted that money does not change hands until the future maturity date.
Indicative prices| USDAZN | Spot | Forward |
| 1 year | 1.7 | 1.798 |
Option
Option is a contract that grants the buyer the right, but not the obligation, to buy or sell a specified currency at a specific exchange rate on a specified date. Money does not change hands until the future maturity date and according to the agreement client pays the premium to the bank.
Indicative prices| USDAZN | 1.7 | 1.8 | 1.85 | 1.9 |
| 6 months | 5.00% | 4.90% | 4.80% | 4.70% |
| 9 months | 5.50% | 5.40% | 5.30% | 5.20% |
| 1 year | 6.00% | 5.90% | 5.80% | 5.60% |
DCD (Dual Currency Deposit)
DCD (Dual Currency Deposit) transaction is one of the most popular structured product for investment purposes. An investor gets a higher interest rate than the normal market rates by buying a Dual Currency Deposit product. Besides the interest rate, this product is designed so that the principal amount is a subject to be exchanged if the spot rate reaches to the pre-defined exchange rate during the contract period.
Commodity future
Commodity future contract is a financial instrument that allow market participants to offset or assume the risk of a price change of an asset over time.
PASHA Bank offers you hedging on the following commodities:
1. Metals (Aluminum, copper, iron, lead, nickel, zinc, gold, silver)
2. Agriculture (wheat, cocoa, coffee, corn, cotton, soybean, sugar)
3. Energy (oil, gas, aviation fuel)
4. Etc.