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FX Risk Management

Stay ahead of the market volatility — and the competition

As global competition grows, Cathay Bank helps businesses access international markets with ease.

The potential for foreign exchange risk rises when conducting business internationally, even when payments are made in US dollars. At Cathay Bank, we help businesses stay competitive by identifying foreign exchange risk exposure and providing risk mitigation strategies to help protect against currency fluctuation and your bottom line.

By tailoring our foreign exchange solutions to your business needs, we help you navigate the global markets with ease, allowing you to focus on expanding your business globally.


Spot contracts

Spot contracts are used to buy or sell currencies at the current exchange rate for immediate delivery and settle within two business days from the trade date. Canadian dollar spot contracts settle one business day from the trade date.


Forward contracts

Forward contracts1 allow you to lock in an exchange rate for settlement on an agreed-upon future date.

For receivables, the longer it takes to collect payments on sold goods, the greater potential for foreign currency fluctuation. For payables, longer payment terms with vendors can mean more working capital for your business, but can leave you exposed to unfavorable shifts in exchange rates.

A forward contract is a great tool to protect you against foreign currency fluctuations and provide a more accurate picture of your future cash flow. Forward contracts range from three days up to 12 months.


Window forward contracts

Like a forward contract, a window forward contract1 also lets you lock in an exchange rate for one or more settlements. It provides you the flexibility to drawdown from the principal balance any time within the contract window period.

Window forward contracts are a good option when the settlement date and amount are uncertain. Window forward contracts range from three days up to 12 months.


Non-deliverable forward contracts

Non-deliverable forward (NDF) contracts1 provide protection against currency exposure within currency-restricted countries. For most restricted currencies, NDF contracts allow you to lock in exchange rates for settlement on the contract date.

NDF contracts do not deliver the notional amount in foreign currency, but instead settle in the net difference of value in US Dollars. The net settlement in US Dollars is determined by the difference between the agreed-upon rate and the official fixing rate.


Foreign currency swap

Swap1 is an agreement between two parties to simultaneously buy and sell identical amounts of one currency for another with two different value dates, normally a spot transaction against a forward transaction.


Foreign currency option

A foreign currency option1 is an agreement between two parties in which the owner (the buyer) has the right, but not the obligation, to exchange one currency for another at an agreed exchange rate (strike price) on a specific date at a premium.


  1. This product or service may not be available to all customers, please ask the Foreign Exchange Department for details.

There are significant risks to most investments. Before you undertake any foreign currency transaction, we encourage you to speak with our FX specialists, in addition to personal research in order to better understand the factors involved that may influence the currency market as well as the risks that are involved. Foreign currency investments are subject to market risk and currency fluctuations, which may involve a loss of principal; FDIC insurance does not cover against a loss in principal due to these types of risks. For more information about the Multi-Currency Account (MCA), Foreign Currency Time Deposit (FCTD) and the risks involved, please contact our Foreign Exchange Department.

FDIC insurance covers your account in the case of the default of the insured depository institution. FDIC insurance for deposits denominated in a foreign currency shall be determined and paid in the amount of US Dollars that is equivalent in value to the amount of the deposit denominated in that foreign currency as of the close of business on the date of default of the insured depository institution, up to the amount established by the FDIC.

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Our specialists are happy to assist you with all your International Banking needs. Please reach out to our team for more information.