|
Forward Rate Bracket
|
A contingent forward contract often used in currency markets. The investor can take advantage of favorable price moves to the upper end of the contract range while remaining protected against moves below the lower end of the contract range. Within the range, the contract settles at the spot rate and the customer pays no option premium. The payoff pattern is similar to an interest rate collar or equity risk reversal in fixed income and equity markets respectively. Also called Fence or Fence Spread, Spread Conversion, Cap and Floor, Knock-In Risk Reversal (diagram), Range Forward Contract (diagram) in currency markets. See also Equity Risk Reversal (diagram), Interest Rate Collar (diagram).
|
