Station Business

These days we often hear the term derivative transactions or structured product in the world of banking, actually what’s derivative transactions? Well before we know the derivative transactions, It’s good we know some of the types of transactions in foreign currencies.

First, exchange transactions today, the transactions performed on the same day by using the currency movements on the day in question.

Second, tomorrow exchange transactions, or commonly called the transaction “Currency Tom”. Well completion of this transaction done on the next day. For example, on this day you buy dollars, and then the completion of the transaction (settlement) is done the next day.

Third, Spot transactions, this transaction settlement two days later. Well, for foreign exchange transactions conducted over two days, called the derivative transactions. Period is varied, there are more than two days, one week, three months, even a year. Derivative transactions are also commonly called the transaction “forward”.

If you’ve ever heard structured product, it is a part or derivative of the derivative transactions. Derivative transactions are given the option (option) is called a particular structured product. The choice variety, for example at the time of settlement later, there is the calculation of the agreed exchange rate, could also use a combination of interest rate calculations. The transaction is conducted on an agreement by the customer and the bank.

In this transaction, the customer should really consider the existing paper agreement. No one knows the future exchange rate is weaker or stronger. That determines how accurate is the customer’s bank or to project how the exchange rate so that if there are losses in the future can be minimized.