The one-year physically settled average rate forward

Background: When using FX forwards to protect the value of future cashflows in foreign currencies, many corporates try to time the execution so that they lock in a more favourable rate than the current forward. Some wait for the rate to improve – and subsequently end up missing the boat. Others try to average into a better rate by entering lots of smaller transactions at different times, resulting in a lot of administrative work without necessarily achieving their aim.

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