Derivatives trade Details of FWD points Bullet points

Derivatives trade Details of FWD points

Bullet points Theory of OTC derivatives What differs Forwards from others Details of FWD points

Theory of OTC derivatives There are two doors for Derivatives users HEDGING Speculation

Theory of OTC derivatives FWD supply demand price

What defines OTC – FWD? Counter. FWD Ove Th. OTC e r Size Forward Swap =spot Rate Forward OTC + Date option Exchange listed No front payment Futures Flex, custom Option Obligation

FWD Details of FWD points FWD rate -=Spot + = = (spot, IR$, IRT) Considered as cost

Details of FWD points =$, Spot*(IRTot, IR IR$)*T/365 Spot USDMNT spot rate IR$ Interest rate for USD products IRT Interest rate for MNT products T Forward contract duration

Details of FWD points Collateral size Market timing Attractive size Competition Matching interest Policy rate decision Base margin rate 17. 0% 16. 0% 15. 0% 16. 2% 14. 0% 13. 0% 15. 5% 12. 0% 14. 0% 11. 0% 10. 0% 12. 5% 9. 0% 8. 0% 16. 1% base 10. 2% 2015 1 2 3 4 5 6 7 8 9 10 11 12 2016 1 2 3 4 5 6 7 8 9 Deposit rates Customer Value IR IR$ Interest rate for USD IR products IRT Interest rate for MNT margin products 12 M 50% Value

Details of FWD points MNT loan / USD deposit 22. 00% BID ASK 5. 50% 13. 50% 16. 20% USD purchase / USD deposit 15. 00% 5. 50% MNT deposit 15. 00% 16. 50% 9. 50% 15. 00%

Example: 3 3 M Ex. 1 FWD 2 – 12 M 6 M FWD Date: 28 -Jun-2015 28 -Mar-2015 28 -Sep-2015 2046. 21 Official rate: 1944. 46 1996. 76 2050. 00 Spot rate: 1945. 00 2000. 00 11. 80% IR margin BASE: 10. 20% 13. 17% 1945 (10. 20%) *3 2050 * (13. 17%) (11. 80%) = 6 / 12 = FWD points = 2000 49. 725 120. 95 263. 36 109. 05 16. 64 Trade Pn. L: 280. 275 215. 25 420. 00 MNT cost save: 102. 11 -62. 70 -125. 4 USD opportunity: -31. 35 261. 60 311. 24 Worth: 351. 035 6 M 3 M @120. 95 @49. 725 12 M @263. 36 Today 2280. 00 FWD 2170. 95 1999. 725 2263. 36

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