‘Extendible forward plus strategy’ for corporates with sterling exposures
PROBLEM: Cable has reached 1.67 but is struggling to move higher, while the forward curve is sharply negative-sloping in the medium term. How do corporates with a monthly stream of expected sterling receipts outperform the forward rates while allowing for further participation to the upside?
SOLUTION: Locking in the current forward rates would mean a one-year rate that is more than 450 points below spot, and a two-year rate that is more than 800 points below spot. Conversely, doing nothing
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