OTC Options
Use
You can use the functions for OTC options in the trading and back office area both to help control the liquidity in your company and to recognize, analyze and hedge against currency risks.
Integration
You can assign OTC currency options both to forex trading and to derivatives instruments and create them in both these areas (see Creating OTC Options ). You can branch from the option data to the structural data of the underlying transaction.
Foreign Exchange |
Derivatives |
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OTC currency options |
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OTC options |
Features
For an overview of the options available, see
Product Types
OTC options: |
Related underlying: |
Prerequisites
Before using the transaction management functions, you have to enter master data.
You need to create your Business Partners , assign the corresponding roles to them and maintain the transaction authorizations. To process financial transactions, you must have defined the banks as authorized as business partners in the system with the corresponding payment details.
Set up the Standing Instructions (correspondence, payment details) and release the business partner.
You also have to make the following settings in Customizing:
Define the product type (if you do not want to use one of the standard product types delivered with the system, you can define your own product types). You create and administer financial transactions and positions on the basis of product types.
Foreign exchange
is one example of a product type.You can also incorporate the related underlying transactions when you define product types. A spot exchange transaction, for example, is defined as an underlying in currency options. As a rule, underlying transactions are generated automatically upon physical exercise.
Since the underlying transaction is split into two transactions, you can enter alternative payment methods for the option.
Define the transaction type: This determines what types of transactions can be concluded for a given product type. It also controls the transaction and position management process. Example:
Purchase
Define the flow type: These describe the various changes to the cash flows. Example:
Sell foreign exchange.
You must assign flow types to transaction types.
For more information, see the implementation guide (IMG).
You can then define financial transactions in the system.