Corporate Treasury Products: Derivative Products


• A Forward agreement, executed for the purpose of buying or selling a certain asset at a previously agreed price on a further date, enables the customer to manage the currency risk that might result from any increase or decrease at the foreign exchange rates. Forward, which is one of the most frequently used products for managing the currency risk, is a derivative product that is appropriate for the companies which do not wish to carry the currency risk on their balance sheets.

 Currency Swap 

• Currency swap, whereby cash flows in different currency types are swapped, is a type of agreement whereby such two currencies are exchanged on the value and maturity date for a certain period of time at the determined exchange rate levels. Currency swap transactions do not involve any currency risk, but entail only interest rate risk. It is used for the purpose of decreasing the cost of borrowing and arranging the cash flow without assuming any currency risk.

 Interest Rate Swap 

• Interest rate swaps, enabling you to convert the interest composition of the debt in the same currency from floating rate to fixed rate, allow for effective risk management. In respect of the interest rate swaps, the principal remains unchanged but the interest amount in the respective period changes.

 Cross Currency Swap 

• Cross currency swaps are used together with the currency swap and the interest rate swap for the purpose of allowing for an effective risk management by swapping different currencies and different interest compositions (fixed or floating) by and between the parties.


• Option is an agreement which grants the right to buy or sell an asset at a certain amount at a certain price until a certain date in future. Unlike the forward contracts, at the present it is not clear that a transaction would be executed on the maturity date as based on the market price. The options as listed in the exchange rate are the options that grant you the right to buy (call) or sell (put) foreign exchange at the given strike rate. Option contracts grant the buyer to trade, and the buyer may exercise such right when it is favorable to do so. On the other hand, the party selling the option is obliged to fulfill the obligations for buying or selling if and when the party buying the option exercises its rights. The spot price of the underlying asset, the strike price, the maturity date, the volatility of the underlying asset and the risk-free interest rate are the key factors that affect the option price. In respect of an option contract, the risk of the buyer is limited to the premium paid, and the liability of the seller is unlimited. The principal risk will be assumed by the party selling the option.