Price a Collar

An FX collar in Fairways FX is a security combining the purchase/sale of an FX cap and the sale/purchase of an FX floor to specify a range in which an FX rate can fluctuate.

 

Log In to Fairways FX
  1. Log in to your Fairways FX account, e.g. https://login.financeactive.com/login.
  2. Select an account.

Dashboard_EN.png

 

Price a Collar
  1. Navigate to Pricing Tools.
  2. Click Select Pricing Tools > Collar Pricing.

PricingTool_SelectPricingTool_EN.png

  1. Complete the form with all relevant details.

Note: Fields marked with an asterisk * are mandatory.

Field

Description

Market Date

Date on which the collar is priced.

Currency Pair

Currencies to buy (for a call) or to sell (for a put).

Collar_EN.png

Field

Description

Exercise Date

Start date of the transaction.

Value Date

2 calendar days later than the exercise date.

Characteristics_EN.png

Field

Description

Type

Direction of the option:

  • PUT: To sell.
  • CALL: To buy.

Notional Amount

Nominal amount invested in the option.

Currency

Currency to buy (for a call) or to sell (for a put).

Strike

Exchange rate level at which the option can be exercised. This rate is usually compared to the spot rate to determine the moneyness of the option.

Barrier Option (European Style)

Includes/excludes a European barrier option.

Barrier Option Type

Note: This field only displays if the barrier option is included.

Behavior between the spot price and the barrier level:

  • Up In: The spot price starts below the barrier level and has to move up for the option to become active.
  • Up Out: The spot price starts below the barrier level and has to move up for the option to be knocked out.
  • Down In: The spot price starts above the barrier level and has to move down for the option to become active.
  • Down Out: The spot price starts above the barrier level and has to move down for the option to become null and void.

Barrier Rate

Note: This field only displays if the barrier option is included.

Value of the barrier.

Option_EN.png

Field

Description

Spot Rate

Specific rates to price the collar.

Forward Points (bp)

Volatility Bought Option

Volatility Sold Option

Note: Click the clock Fairways_Clock.png to use real-time rates or click the adjacent last referenced rates in the application to use them.

MarketParameter_EN.png

  1. Click Validate to price the collar.

Collar_Price_EN.png

The pricing results display.

Note: Click +/-5 to simulate different results.

Collar_Priced_EN.png

Was this article helpful?
0 out of 0 found this helpful