1x2 Target Redemption Forward

You have already hedged part of your currency risk. Do you now wish to optimize another part of your unhedged foreign currency exposure? For this purpose UBS offers the “1x2 Target Redemption Forward”.

The objective of this solution is that – alongside existing hedging products – you can optimize part of your unhedged foreign currency exposure in order to achieve more attractive exchange rates.

It is important to note that this product does not offer complete currency hedging, since you have no clarity about the exact amount in advance.

To show you how this product works, we will take the example of buying euros against Swiss francs with 12 monthly fixings, in each case EUR 50,000 against EUR 100,000. The “target level” defines the maximum achievable gain of 10 rappen per euro. The advantage is that the exercise price – or “strike level” – is better than the current forward rate.

The same two scenarios apply to each of the 12 fixings: if the market rate is above the strike level, then you buy the single amount of EUR 50,000 and the target level is reduced by the realized gain. If the market rate is below the strike level, then you buy double the amount, that is EUR 100,000, without affecting the target level.

Let us show you three possible developments over the term of the product.