8.4 Product Code - COPH
COPH – Currency Options Traded Physically Settled
Business Scenario
The financial product COPH that is, Currency Options Trade Physically Settled helps Corporate/Banks to own or sell the underlying asset (underlying currency) when the options are exercised and hedge against adverse movements in exchange rates.
Targeted Customer Segment: Corporate/Banks who seeks hedging against foreign currency risk and thereby providing the opportunity to exchange the currencies if the option is found worth exchanging.
Introduction
Product COPH covers the currency options of physically settled trade type deals. Product COPH holds good for all the currency option types of both buy and sell with European, American as well as Bermudan style of expiry. Product covers the various kinds of exotic options (options with barriers). Using the product COPH an underlying Forex Spot Contract gets initiated on the exercise of the options which is to be physically settled.
Synopsis (ex. High level features etc.)
- Covers all the CO types of Price-based.
- Exchange of currency\Settlement is done on the maturity date or exercise date provided the option is In the Money.
- European, American and Bermudan Expiry styles covered for CO’s.
- Amortization and Revaluation setup is done with daily frequency.
- Delta Accounting is covered in this product.
Detailed Coverage
Currency Options can be cash settled as well as physically settled. Product COPH is meant for cash settled currency options.
Product COPH covers the following features:
Table 8-13 Detailed Coverage
Features | Type |
---|---|
Types of the Deal Covered |
|
Types of the Contract Covered |
|
Delivery Type | Cash |
Currency Option Types Covered |
|
Options Styles Covered |
|
Expiry Style’s Covered |
|
Other Features Covered |
|
Events Covered (including brief information on accounting)
Table 8-14 Events Covered
Events Covered | Terminology |
---|---|
AMDG | Amortization of Deferred Gains-Hedge |
AMND | Amendment Option Deal Contract |
AMRT | Amortization Of Deferred Inception Gain |
BOOK | Booking of the deal Contract |
EXER | Exercise Of Option |
EXPR | Expiry Of Option |
EXST | Exercise Settlement Of Option |
PRPT | Premium Payment\Premium Collection |
REVL | Revaluation Of Option |
REVR | Reversal Of Deal |
RTFX | Rate Fixing |
TERM | Termination of Option Contract |
Advices Supported
Table 8-15 Advices Supported
Advices | - |
---|---|
OT_CO_TRIG | Currency Options Barrier Event |
OT_CO_CANC | Currency Options Cancellation |
OT_CO_CONF | Currency Options Confirmation |
OT_CO_DEAL_TKT | Currency Options Deal Ticket |
OT_CO_TERM | Currency Options Termination Advice |
OT_CO_TRIG | Currency Options Barrier Event |
PAYMENT_MESSAGE | Payment Message |
REVSWIFT | Cancellation of Contract |
Messages
Following SWIFT Messages setup done in the COPH product as part of product life cycle.
Table 8-16 SWIFT Messages
SWIFT Messages | Contact Field |
---|---|
MT 306/MT 305 | CO Confirmation Message |
MT 306/MT 305 | CO Amendment Message |
MT 306/MT 305 | CO Cancellation Advice |
MT 306/MT 305 | CO Termination Message |
MT 3306/MT 305 | Currency Options Barrier Hit Message |
Premium/Charges/Brokerage
Premium
Product COPH enables the Premium Collection or Premium Payment through:
- Option Premium is expressed as a percentage of the notional principal / contract amount.
- Option Premium can be a flat amount as well.
Charges
- Component - OTBOOKCHG - OT Options Booking Charge
- Rule - OTBKCHG - OT Options Booking Charge Rule
- Flat Amount GBP 125
Charges
COPH product is parametrized to handle Chargse feature. The details are available below:
- Component - OTBOOKCHG - OT Options Booking Charge
- Rule - OTBKCHG - OT Options Booking Charge Rule
- Flat Amount GBP 125
Special/Other Features
- Exotic Options (Options with barriers) are covered.
- Auto Exercise as well as Manual Exercise is supported.
- Money will be settled through the foreign exchange spot deal (on exercise of the option).
Additional information (ex. UDF & other Special Maintenance)
In case the Bank wants to capture any additional information regarding the agreement/customer, the Bank can capture the same by defining the User Defined Fields (UDF).
OT Options Module Maintenance
OT Options module has to be setup with the following furnished maintenance,
- Option Branch Parameter Maintenance
- Role To Head mapping Class Maintenance
- Accounting Event Class Maintenance
- OT Product Maintenance
- Floating Rate Source Maintenance
- DV Rate Type Maintenance
- DV Float Rate Code Maintenance
- Floating Rate Maintenance
- Advice Format Maintenance
- Other General Maintenance Needed For Branch
Parent topic: Product Catalog - Treasury Options