Use

Exchange rates

When you conclude a forward exchange transaction, you enter the transaction spot rate for the purchase currency/sale currency and the transaction swap rate for the purchase currency/sale currency. In addition, the system determines the market spot rate for the purchase currency/local currency and the market swap rate for the purchase currency/local currency on the contract date. The transaction spot rate in sale currency/local currency and the transaction swap rate for the sale currency/local currency are calculated on the basis of the exchange rates for the purchase currency/local currency and the sale currency/purchase currency.

Amounts

As a result of the transaction amounts you enter (in purchase and sale currency) and the rates calculated by the system, there are three amounts (in purchase currency, sale currency and local currency), which represent the forward rates for the transaction. Likewise, there are three amounts for the transaction spot rates. The system adjusts the transaction amount that is the following currency in the currency pair 'purchase currency/sale currency'.

Example

Valuation currency

If the valuation currency is the purchase currency, sale currency or local currency, the rates for forward exchange transactions are valued using the about rates and amounts. If this is not the case, the system determines the transaction spot rate and transaction swap rate for the purchase currency/valuation currency for each valuation key date and calculates the amounts according to the above rules.

Rate valuation for forward exchange transactions considers the change in the spot or forward exchange rate on the key date when compared with the spot or forward exchange rate for the transaction. There are three valuation types:

The system uses the spot and forward rates on the forex market to calculate the cross-rate between the purchase currency/valuation currency and the sale currency/valuation currency on the valuation key date. These rates are determined on the basis of spot and swap exchange rate types for purchase currency/valuation currency and sale currency/valuation currency as follows:

The system determines the foreign exchange spot rate purchase currency/valuation currency .

The procedure for the sales currency is the same as that for the purchase currency.Foreign exchange swap rates are only read if the system should valuate using the forward market rate on the valuation key date.

In each of the three cases the rates can be determined in the usual way ("normal") or using cross-rates ("cross"). If you use cross-rates, the gain or loss associated with the purchase currency and the gain or loss associated with the sale currency are disclosed separately. If you choose "normal", the gains and losses are not split in this way.

Normal

The forward rate for the transaction is compared to the result of the following calculation: Transaction amount in purchase currency x Market rate on the valuation key date for purchase currency/valuation currency– Transaction amount in sale currency x Market rate on the valuation key date for sale currency/valuation currency. Both transaction amounts (in purchase and sale currency) are translated using the market spot or forward rates for purchase currency/valuation currency and sale currency/valuation currency in order to determine the difference.

If you use the transaction spot rate as a basis for the comparison, the system adjusts the amount in the following currency from the transaction to account for the transaction swap 'purchase currency/sale currency' and then translates the adjusted amount.

Cross

The transaction is treated as if there were two transactions: 'purchase currency – valuation currency' and 'valuation currency – sale currency'. The calculation for the purchase currency is described below. The same algorithm is used in the calculation for the sale currency.

If the comparison is based on the transaction forward rate, the transaction amount in purchase currency is calculated using the market spot or forward rate and compared with the amount in valuation currency. This is calculated by translating the transaction amount in purchase currency using the transaction forward rate 'purchase currency/valuation currency'.

If the comparison is based on the transaction spot rate, and the purchase currency is the following currency in the currency pair 'purchase currency/sale currency', the system adjusts the transaction amount in purchase currency to account for the transaction spot rate 'purchase currency/sale currency' and then translates the adjusted amount. The amount in valuation currency is calculated by translating the adjusted transaction amount in purchase currency using the transaction spot rate 'purchase currency/valuation currency'.

The difference, which is calculated in valuation currency, is translated into the position currency using the market exchange rate. [For forward exchange transactions, the system always assumes that the position currency is the same as the valuation currency. The only exception is when the valuation currency is changed during the transaction term, which is a special case.]

You apply rules to these amounts in order to calculate the write-up and write-down amounts. The following rules can be used:

Flows are generated for the write-up or write-down amounts. If the +/- sign differs from earlier valuations, the system generates clearing flows. If the result of the valuation is that the position has to be written down, for example, and write-up flows already exist, the system would generate one flow to clear the write-ups, and one flow for the remaining write-down amount. The same applies if a write-up offsets former write-downs. The write-up and write-down amounts are only disclosed in valuation currency.