Vectra Bank Colorado

This is the most common foreign exchange transaction. A spot transaction is a binding obligation to buy or sell a certain amount of foreign currency at the current market rate for settlement within two business days. We can arrange payments for immediate delivery at competitive rates in settlement of foreign currency accounts payable. Conversely, incoming foreign currency accounts receivable payments may be efficiently directed through our extensive network of correspondent banks for final credit to your US dollar account with Vectra Bank.

A forward contract is a binding obligation to buy or sell a certain amount of foreign currency at a pre-arranged rate of exchange, on a certain date.

A forward contract guarantees the US dollar value of a business commitment resulting in the purchase or sale of a foreign currency at a future date. The proper use of forward contracts enable the bank client to hedge the US dollar equivalent of their payable or receivable, meet the terms of the commercial contract and preserve the margins of the underlying transaction.

The price of a forward contract is based on the spot rate at the time the deal is booked, and adjusted for the interest rate differential between the two currencies being exchanged. The forward rate is a function of the spot rate and the interest rate difference between the two currencies; it is NOT a prediction of where the market thinks the FX rate will be. Some currencies trade at a premium (it is more expensive to buy that currency for a future delivery date than for immediate delivery) while others trade at a discount, and are cheaper to buy in the forward market.

Click here to download the Forward Contracts PDF.

CONVENIENCE FROM A RELIABLE RELATIONSHIP
Departing on that long awaited vacation to Europe? Returning from business meetings in Hong Kong? Make Vectra Bank your reliable source for exchanging more than 80 foreign currencies from around the globe. With user–friendly order options and competitive exchange rates, Vectra Bank enables you to be ready for that next adventure to Thailand or sales conference in Brussels.

SERVICE
When travelling globally, the last thing you need to worry about is having the appropriate currency in hand when you arrive. You can take care of this at Vectra Bank before you leave and arrive with local currency for tips, food and transportation.

You can avoid the hassle, timing issues and potential extra fees associated with exchanging currency at local banks, airports, train stations, hotels, private exchange kiosks and ATMs. When you return, any unused foreign currency (no coins) can be brought back to Vectra Bank and we’ll buy it back at prevailing exchange rates.

SAVINGS
You will receive reliable, competitive exchange rates, which are updated daily, for both buying and selling foreign currency from your local bank. Know your exchange rate/conversion before leaving for more accurate expense accounting. Don’t get caught at the mercy of local merchants or street vendors, or get stuck upon arrival needing local currency and having to use whatever is available. And remember, our customers do not pay any additional service fees for buying or selling foreign currency with us.

Click here to download the Foreign Currency Exchange PDF.

RETAIN CONTROL WITH THE RIGHT HEDGING TOOLS
Your company works hard and has built a reputation for quality products and excellent service. You have expanded into international markets.

You have great local partners who help with the nuances of customs and languages in those markets. You discover the best clients. You negotiate the best deals. You’ve even gone so far as to offer to price the transaction in their currency, to make the deal more acceptable to the new client. You leave nothing to chance.

Except... FX markets are very volatile. That payment in local currency worth $100,000 today may be worth less (or more) when received in 90 or 180 days. What can you do to assure that all that hard work really pays off?

CONTROL YOUR TOP AND BOTTOM LINE
Hedging the risks arising from pricing your transaction in foreign exchange, you can better get close to your top line revenue goals, as well as managing your operating margins. The proper FX hedge can help mitigate the FX risks, making that foreign transaction seem very much like the ones you do in the United States.

USE THE RIGHT TOOLS
Regardless of the underlying commercial transaction, there are a number of FX products and services available to assist in hedging foreign exchange financial risks. Hedging the FX market risk lets you manage the technical and commercial aspects of your business. Consult your FX Advisor for the combination of services that can help provide you the appropriate protection.

• Traditional Forwards
• Window Forwards
• Non–Deliverable Forwards
• Foreign Exchange Swaps
• FX Options
• Debt, Currency Accounts & Deposits

Click here to download the Hedging Solutions PDF.

A window forward is a binding obligation to buy or sell a certain amount of foreign currency at a pre-arranged rate of exchange within a predetermined date range, as opposed to a specific settlement date.

Window or option-dated forward contracts are used to hedge known future cash flows by providing a locked in exchange rate, but for which there is less certainty about the future payment date. By offering constant pricing over a continuous range of possible delivery/settlement dates, the client receives efficient price protection and maximum delivery flexibility. Using a window forward can simplify your accounting and eliminate the costs associated with shifting foreign currency settlement positions from one date to another.

Like a regular forward, a non-deliverable forward is a binding obligation to buy or sell a certain amount of foreign currency at a pre-arranged rate of exchange on a certain date.

This instrument is a contract to hedge currency exposures offshore from the country of origin, where a conventional forward market does not exist, or is restricted by domestic law. The NDF is settled in U.S. dollars at maturity based on the then current offsetting spot exchange rate and involves no delivery of foreign the currency. The bank client will have to execute a locally approved spot transaction in the local FX market to actually buy or sell the foreign currency that was previously hedged, in order to realize the full value of the transaction.

This is the simultaneous purchase and sale of the same amount of a given currency for two different dates, against the sale and purchase of another.

Swaps are a cash management tool that gives the client the ability to control cash flows, and reduce foreign exchange risk and aids in the centralization of cash flows into one currency. Essentially, swapping two currencies is similar to borrowing one currency and lending another for the same period. The interest rate differential, if any, between the two currencies, is expressed as the swap rate. The swap rate neutralizes this interest rate difference, so that there is no penalty or benefit from holding one currency over the other.

This is a contract conferring the right, but not the obligation to buy (call) or to sell (put), a specified amount of an instrument at a specified price within a pre-determined time period.

A currency option mitigates risk by affording the buyer the right, but not the obligation, to purchase or sell a currency at a specific exchange rate (strike price) during a set time frame pending bid acceptance or while an obligation exists. The buyer can exercise the option during its term, at expiration, or allow the option to expire. Currency options define and limit risk associated with firm or contingent financial commitments denominated in foreign currency to the amount of premium paid, while offering unlimited opportunity to participate in favorable movements.

A foreign currency account is a U.S. demand deposit account used to hold a specific foreign currency but does not earn interest. It can be useful in specific instances when a company has a comparable volume and/or value of payables and receivables in that currency.

A time deposit account in a foreign currency is an investment deposit that earns that country's prevailing interest rate for a set time period.

This is a hedging strategy which uses a risk reversal whose total premium is not equal to zero.

When hedging future or contingent commitments to buy or sell foreign currencies through the use of options, premium costs associated with the purchase of the option may be reduced or eliminated by simultaneously selling an option to Vectra Bank to purchase the currency commitment at any range of prices. By first assessing the acceptable degree of risk and concurrent premium costs, a desired target ceiling (or base) can be determined while setting a target base (or ceiling) predicated upon either: premium reduction, elimination, or market prognostication. At delivery date, settlement would occur at no worse than the price being protected against a financial loss, but possibly at the desired profit level or within the predetermined option band between the base and ceiling.