Hedging Currency Risks
The bank’s principle forward instruments
The principle forward instruments offered by Sberbank:
- Deliverable forward — purchase/sale transaction of a certain amount of one currency (or precious metal) for another at a particular time in the future at a rate agreed at the time of the transaction
- Non-deliverable forward (ndf) — similar to a deliverable forward, but at the time of execution of contract the settlements between parties are made only at the rate of the exchange difference
- Option — buying the option to purchase (call) and sell (put) a certain amount of one currency (or precious metal) for another at a particular rate at a particular time in the future (european option) or at any time before this particular date (American option)
- Futures contracts for the U.S. dollar and Euro for Russian rubles at the Moscow Interbank Currency Exchange (MICEX) — standardized forward contracts, which are non-deliverable (rated) instruments.
Financial institutions interested in forward and option contracts should:
- Sign a General Terms Agreement for Bilateral Transactions on the Interbank Market (available only in Russian) with Sberbank
- Contact the Sberbank operations department that provides services to the organization, giving notice of intent to conclude a particular forward transaction and request a quotation for this particular instrument
- On the basis of information received from Sberbank officers make a decision on the advisability of concluding the corresponding transaction
- Conclude the forward transaction with Sberbank (if the conditions offered by sberbank satisfy the company).