A time option forward settles inside a window at one agreed rate
Table of Contents
1. Summary
A time option forward commits the client to exchange currencies at a pre-agreed rate, at some point between two pre-agreed dates. The word option refers only to that flexibility. The client must still complete the whole amount by the final date.
2. Detail
The market also calls it a window forward. A drawdown cannot be earlier than the start date. The flexibility carries a premium over a forward to one date in the window, which comes from the forward points and grows with the length of the window.
3. See also
- FX forwards — the structure note.
- FX Forward — completes: the base product.
- Forward points are the difference between the outright and spot — completes: the source of the premium.