The Maverick Treasurer Magazine - Jan 2016

THE MAVERICK TREASURER
The Maverick Treasurer 1
By: - Rahul Magan
Corporate Treasurer, EXL Service Holdings, Inc. (NASDAQ Listed)
Founder of the Brand, “Foreign Exchange Maverick Thinkers”
91-9899242978, Skype Connect ~Rahul5327, Twitter @ Rahulmagan8

Welcome Mates!!
Welcome to the January edition of “The Maverick Treasurer”. A Magazine which talks about
Treasury & Foreign Exchange Risk Management, Derivatives & Currency Trading, Interest Rates
Derivatives, Fixed Income Markets (Debt Markets, Money Markets, Capital Markets), Valuation of
Derivatives Instruments, Central Bank Policy Actions, Hedge Accounting (US GaaP, IFRS, IAS, Indian
GaaP, IND-AS), Guidance towards International Accounting Standards, Trading tips pertaining to
variety of assets classes covering both Onshore and Offshore Treasury Markets which in turn would
sink with Proprietary Trading Desk of “ Foreign Exchange Maverick Thinkers”
Editorial Desk of “ The Maverick Treasurer “ would always keep looking at those issues which are
very sensitive in Foreign Exchange Markets and in turn would be having Financial Impact in
Financials ( Balance Sheet , Profit & Loss Account , Cash Flow Statements ) of both Exporters and
Importers.
Editorial Desk of the Magazine would always try to present unseen faces of the Foreign Exchange
Markets and update Chief Executive Officers, Chief Financial Officers, Corporate Treasurers, Private
Sector Bankers, Public Sector Bankers, Financial Controllers, Officers of Banks Oversight Functions,
and Foreign Exchange Traders via Global presence of our Brand.
Well in the maiden issue “The Maverick Treasurers “ Editorial Desk would be covering important
aspects of USD , USDX ( Dollar Index ), AUD ( Australian Dollar ) , NZD ( New Zealand Dollar ) , CAD
( Canadian Dollar ) , Euro , GBP , JPY ( Japanese Yen). Editorial Desk would be covering top 8
currencies of the world as majority of the Exporters as well as Importers are having sufficient
exposures in aforesaid currencies.
Well at the same time Magazine is also launching a very unique section known as “Financial
Derivatives & Analytics “ which would covering valuation of Derivatives Instruments for both
Exporters as well as Importers. Since it’s a maiden issue henceforth Editorial Desk would be covering
Exporters Perspective much however in subsequent issues Importers Instruments would be there.
Well “Financial Analytics & Derivatives” Section would be covering Valuation of Range Forwards
(Exporters) from 1 Y till 5 Y, Valuation of Buy Put Contracts 1 Y till 5 Y. Well valuations are done
using OTMF (Out of the Money Forwards) which is 1 Implied Volatility away from ATMF (At the
Money Forwards). The section of Financial Derivatives & Analytics would focus on Exporters hedging
program via LTFX (Long Term Forwards Contracts) vs Cost Reduction Structures which is Range
Forwards Contracts.
Well valuation of “Financial Derivatives & Analytics “done using Modified Black Scholes Model
having respective parameters using Thomson Reuters. Over the period of the time Editorial Desk
would be covering Range Forwards (Importers), Seagull (Exporters), Seagull (Importers),
Participatory Forwards, Straddle , Strangle , Call Spread, Put Spread and respective Derivatives
Strategies using variety of models.
Best,
Rahul Magan
Editor, The Maverick Treasurer
91-9899242978, Skype Connect~ Rahul5327, Twitter @ Rahulmagan8

Circulation of the Magazine
Well Magazine is intended to circulate at following places across the Globe keeping following
prices:-
1. India – Rs 100
2. Australia – AUD 10
3. New Zealand – NZD 10
4. Singapore SGD 10
5. Canada – CAD 10
6. United States – USD 10
7. London – GBP 15
8. European Union – Euro 15 ##
9. Tokyo – JPY 1200
10. Hong Kong – HKD 35
## Prices would vary from Country to Country in European Union like London, Luxembourg,
Frankfurt, Germany, Munich, France, Denmark, Sweden, Portugal, Italy, Ireland, Greece,
Scotland and respective countries of European Union.

About the Brand “Foreign Exchange Maverick Thinkers “
Well the Brand “Foreign Exchange Maverick Thinkers “founded 5 Years ago with the
purpose of educating folks across the Globe covering variety of topics in markets.
With the same intent our Brand now available on all Electronic Platforms like You Tube
Channel, Daily Motion Channel, What’s UP APP Derivatives Groups, Telegram
Derivatives Groups , LinkedIn, LinkedIn Academies, Twitter Academies, Skype Foreign
Exchange Groups, Google Groups ~”Foreign Exchange Maverick Thinkers “, Google Blog
~” Maverick Treasurers Blog “
 You Tube Channel:- Well You Tube channel - “Foreign Exchange Maverick
Thinkers “ covers 100 Technical videos on Foreign Exchange Risk Management,
Treasury Risk Management, Onshore & Onshore Treasury Markets (Singapore,
NY, London, Luxembourg, Frankfurt, Australia, Japan, Philippines, Dubai),
Interest Rate Derivatives like Interest Rate Swaps, Credit Swaps, Total Return
Swaps, Credit Default Swaps, Fixed Income Markets (Money Markets, Debt
Markets, Capital Markets), International Accounting Standards (IFRS, US GaaP,
International Accounting Standards, IND-AS, Indian GaaP), Corporate Finance ,
Strategic Finance , Fair Valuation , Business Valuation , Investment Banking and
respective topics.
You Tube
Channel
Daily Motion
Channel
Whats UP
Derivatives
Groups
Telegram
Groups
LinkedIn
Academies
Twitter
Academies
Skype
Academies
Google
Group
Google Blog

 Daily Motion Channel: - Well on the lines of You Tube Channel “Foreign
Exchange Maverick Thinkers “having my own Channel on largest video site of
the world which is Daily Motion where by covering all the 100 Technical videos
from Foreign Exchange Risk Management till Investment Banking.
 What’s UP APP Derivatives Groups:- Running 4 Derivatives Groups ~ "
Maverick Traders " on What’s UP APP having 400 members where by covering
(Treasury Risk Management , Derivatives Risk Management , Currency Trading
, Foreign Exchange Derivatives , Commodities Trading , Hedge Accounting )
 Telegram Derivatives Groups:- Well on the lines of What’s UP APP
Derivatives Groups having my own Derivatives Groups ~ “Maverick Traders “
on Telegram where by covering International Traders across the Globe.
 LinkedIn & LinkedIn Academies :- Having LinkedIn Networking of 70 Million
LinkedIn Connects across the Globe which covers Corporate Treasurers, CFO,
CEO , Bankers , Corporate Finance Professionals , Finance Controllers , Board
Members , Information Technology Experts , PHD’s , Management
Graduates+++++++++
 Twitter Academies: - Having Education Academies on Twitter where by
sharing thoughts covering variety of topics from Foreign Exchange, Treasury
till International Economies with all Global members.
 Skype Foreign Exchange Groups: - Having Education Academies on Skype
where by covering variety of topics from Foreign Exchange, Treasury till
International Economies with all Global members.
 Google Groups ~” Foreign Exchange Maverick Thinkers “:- Having Google
Group which is further attached with Digital Library of having Foreign Author
Books, Financial Modelling Excel based Models , Cash Flow Modelling Models ,
Risk based Models, Accounting Guides , RBI Master Circulars, CFA Books and
respective others. Well as of now Google Group is having more than 200
members spreading across the Globe.
 Google Blog “Maverick Treasurers Blog: - Well “Foreign Exchange Maverick
Thinkers” is having its own Google Blog where by the purpose is to link with
members across the Globe. As of now Google Group is covering all the topics
from Foreign Exchange till Business Valuation. Group is open to all the
members across the Globe.

The Maverick Treasurer – Table of Contents
Particulars Page No
Global Economic View 7
Valuation of Currencies
Perspective of AUD ( Australian Dollar ) 8
Valuation of Australian Dollar ~ LTFX vs Options Derivatives 9
Perspective of NZD ( New Zealand Dollar ) 10
Valuation of New Zealand Dollar ~ LTFX vs Options Derivatives 11
Perspective of CAD ( Canadian Dollar ) 12
Valuation of Canadian Dollar ~ LTFX vs Options Derivatives 13
Perspective of Euro ( Euro as a Currency ) 14
Valuation of Euro ~ LTFX vs Options Derivatives 15
Perspective of GBP ( GBP as a Currency ) 16
Valuation of GBP ~ LTFX vs Options Derivatives 17
Perspective of JPY ( Japanese Yen ) 18
Valuation of Japanese Yen ~ LTFX vs Options Derivatives 19
All Currencies ~ Comparison of Implied Volatilities 20
Forecast of Currencies ~Year 2016 21
View of Editorial Desk 21
Financial Derivatives & Analytics
Valuation of Range Forwards ( Exporters ) & Seagull – 1 Y till 5 Y 23
Range Forwards vs LTFX – 1 Y till 5 Y 25
Valuation of Buy Put Contracts – 1 Y till 5 Y 26
Upcoming Training Programs of “ Foreign Exchange Maverick
Thinkers”
27

Global Economic Review
The global growth drag emanating from EM and the global manufacturing
sector is persisting into the final quarter of the year. Latest forward-looking
global manufacturing indicators show global goods output declining to lowest levels
since April 2013 primarily driven by weakness in the EM sector, but
increasingly impacting DM as well, as this week’s US ISM and surprisingly weak
US payrolls underscore. On net, EM downward revisions are more substantial,
reflected in the Global economy. In particular, various forecasts have once again downgraded
China growth forecasts for 2015 and 2016
GBP, and now expect Japan GBP, Taiwan GBP, and possibly Singapore to already
be in technical recession.
This broader global weakness has fed-back into G4 policy more meaningfully in
recent weeks. In the US, two weeks ago the Fed dovish surprised markets by
neither hiking, nor giving a strong intention of a near-term hike. The policy statement
cited “developments abroad”, which Chair Yellen in her press conference confirmed
included downside China risks, amongst others. And so our first forecasted Fed hike
is now moved back by a quarter to December. In the UK, our first expected
BoE rate hike has similarly been pushed back by a quarter.
Meanwhile, author also reiterate the observation that
growth and disinflation risks originating primarily from EM are a common global
shock for developed world policymakers, but which act less as a differentiator to
drive material divergence between G4 economies. Hence, despite these material
changes to policy trajectories, our forecast revisions amongst the majors are
marginal. EUR/USD is expected to see a shallower 1.08 trough in 1Q, as ECB QE
expansion remains a risk, not baseline scenario. USD/JPY is unchanged, peaking at
123 in 1Q16 as a one-quarter delay in Fed hiking and one-quarter front-load in BoJ
QQE roughly offset each other. This is not to downplay the potential volatility that
may surround these upcoming policy events.
Indeed, the shifting timing and
signalling of policy, not to mention the periodic de-leveraging rallies seen recently in
JPY and EUR will keep intra-G4 FX risk more difficult to manage than G4-EM risk,
for example. Rather, we simply to recognize that the medium-term trajectories we
have been anticipating for some time in these reserves currencies, remain intact.
On the other hand, with few signs of a turnaround of EM downside risk, we
further downgrade some EM FX forecasts, even after last month's substantial
across-the-board revisions. This month we further downgrade TWD and IDR in
Asia, and MXN in Latin America. In EMEA EM, we downgrade ZAR targets as
well, but in contrast, the upward EUR revision pushes up CEEMEA forecasts in
parallel.

Perspective on Commodities Currencies – Australian Dollar (AUD)
Well as we understand that valuation of Commodities are at low specially OIL. We also
understand that world financial system is dominated by three Commodities Currencies which
are Australian Dollar, New Zealand Dollar, and Canadian Dollar. Well over the period of time
one proxy Commodity Currency is already there which Chinese Yuan is or RMB. China is
always having deep impact on the valuation of Commodities Currencies.
Well sitting today Australian Dollar is trading at .70 levels which is very low however at the
same time good for Australian Exporters and not very good for Australian Importers. The
prospect for Australian Dollar is to depreciate further as Commodities are falling. AUD/USD
which is also a direct pair is highly correlated with valuation of Commodities across the Globe.
Sitting today which is 30th Jan’16 Australian Dollar vs USD is trading at .7082/.7087 which
effectively means if you would like to sell one Aussie against USD then you would be getting
.7082 cents and as an importer you have to pay .7087 to convert into Aussie.
1. Australian Dollar is facing MTD ( Month till Date ) volatility of -2.65% vs USD
2. Australian Dollar is facing 3M ( 3 Months ) volatility of -.77% vs USD
3. Australian Dollar is facing 6M ( 6 Months ) volatility of -3.01% vs USD
4. Australian Dollar is facing YTD ( Year till Date ) volatility of -2.65% vs USD
Advice for Exporters and Importers:-
Well as we understand that Commodities Prices are getting highly volatile and there are lots
of projections in the markets which suggest that OIL would stick at $ 30 / Barrel over a long
period of time henceforth all three Commodities Currencies Australian Dollar , New Zealand
Dollar and Canadian Dollar would be facing big volatility. There is lots of pressure on Reserve
Bank of Australia (RBA) to cut the rates as well to maintain the carry trades.
Well we clearly understand that Australian Dollar amongst one of the very important
currencies from Carry Trade point of view however AUD acting as Investment Carry Trade.
## Short Term Forwards Contracts are those contracts whose maturity is rolling 12 months.
Sitting today which is 30th Jan’16 rolling 12 months contracts are 30th Jan’17 and all the
contracts having maturity date over and above 30th Jan’17 is known as LTFX or Long Term
Forwards Contracts.
## Well premiums of having both short term and long term is decided by Interest Rate Parity
(IRP) which is nothing but the difference between Interest Rates of Reserve Bank of Australia
which is known as Cash Rate and USD Interest Rates.
## If Premiums are positive then markets are expecting depreciation in the base currency
which is Australian Dollar however if premiums are negative then markets are expecting
appreciation in the base currency which is Australian Dollar. Well here we are talking about

Looking at the aforesaid prices it is advisable to have Options for Australian Dollar covering
your Exports Receivables as this would help you protect of downside as well as update in the
movement of the Australian Dollar.
Volatility in Australian Dollar – Last 5 Years
Hey Traders
~ see a great
fall in
Australian
Dollar!!
Aussie would fall further and may touch
.65 levels soon as Commodities
Currencies are falling and may fall
more in near term.

Perspective on Commodities Currencies – New Zealand Dollar (NZD)
Well sitting today New Zealand Dollar is trading at .64 levels which is very low however at
the same time good for New Zealand Exporters however not very good for New Zealand
Importers. The prospect for New Zealand Dollar is to depreciate further as Commodities are
falling. NZD/USD which is also a direct pair is highly correlated with valuation of
Commodities across the Globe.
Sitting today which is 30th Jan’16 New Zealand Dollar vs USD is trading at .6469/.6497 which
effectively means if you would like to sell one NewZie against USD then you would be getting
..6469 cents and as an importer you have to pay .6497 to convert into NewZie.
1. New Zealand Dollar is facing MTD ( Month till Date ) volatility of -5.22% vs USD
2. New Zealand Dollar is facing 3M ( 3 Months ) volatility of -4.66% vs USD
3. New Zealand Dollar is facing 6M ( 6 Months ) volatility of -1.72% vs USD
4. New Zealand Dollar is facing YTD ( Year till Date ) volatility of -5.22% vs USD
period of time henceforth all three Commodities Currencies Australian Dollar , New Zealand
Dollar and Canadian Dollar would be facing big volatility. Well Exporters and Importers are
advised to hedge their Foreign Currency whether Receivables, Payables using Options
Contracts vs hedging the same using Plain Vanilla Forwards Contracts whether STFX (Short
Term Forwards Contracts) or LTFX (Long Term Forwards Contracts)
Forwards Contracts.
(IRP) which is nothing but the difference between Interest Rates of Reserve Bank of New
Zealand and USD Interest Rates.
which is New Zealand Dollar however if premiums are negative then markets are expecting
appreciation in the base currency which is New Zealand Dollar. Well here we are talking
about Commodities Currencies henceforth spot movement as well as premiums are always
volatile in nature henceforth Options are always advisable for both Exporters as well as
Importers.

Looking at the aforesaid prices it is advisable to have Options for New Zealand Dollar
covering your Exports Receivables as this would help you protect of downside as well as
update in the movement of the New Zealand Dollar.
Volatility in New Zealand Dollar – Last 5 Years
Hey Traders ~
see a great fall
in New Zealand
Dollar!!
New Zealand would fall further and
may touch .60 levels soon as
Commodities Currencies are falling and
may fall more in near term.

Perspective on Commodities Currencies – Canadian Dollar (CAD)
Well sitting today Canadian Dollar is trading at 1.3971 levels. We all understand that
Canadian is an US ally henceforth if USDX which is Dollar Index would go so would be the
valuation of Canadian Dollar. If USDX would go down then the valuation of Canadian Dollar
would go down. As we all aware of the fact that in last few weeks USDX is losing.
Sitting today which is 30th Jan’16 Canadian Dollar vs USD is trading at 1.3971/1.3975 which
effectively means if you sell one $ then you would get 1.3971 Canadian Dollar however if you
would like to buy 1 Canadian Dollar then you have to shell 1.3975 from your packet.
1. Canadian Dollar is facing MTD ( Month till Date ) volatility of .95% vs USD
2. Canadian Dollar is facing 3M ( 3 Months ) volatility of -.84% vs USD
3. Canadian Dollar is facing 6M ( 6 Months ) volatility of 6.76% vs USD
4. Canadian Dollar is facing YTD ( Year till Date ) volatility of .95% vs USD
period of time henceforth all three Commodities Currencies Australian Dollar , Canadian
Dollar and Canadian Dollar would be facing big volatility. Well Exporters and Importers are
advised to hedge their Foreign Currency whether Receivables, Payables using Options
Contracts vs hedging the same using Plain Vanilla Forwards Contracts whether STFX (Short
Term Forwards Contracts) or LTFX (Long Term Forwards Contracts)
Forwards Contracts.
(IRP) which is nothing but the difference between Interest Rates of Reserve Bank of Canada
(RBC) and USD Interest Rates.
which is Canadian Dollar however if premiums are negative then markets are expecting
appreciation in the base currency which is Canadian Dollar. Well here we are talking about
Commodities Currencies henceforth spot movement as well as premiums are always volatile
in nature henceforth Options are always advisable for both Exporters as well as Importers.

Looking at the aforesaid prices it is advisable to have Options for Canadian Dollar covering
all your exports receivables.
Volatility in Canadian Dollar – Last 5 Years
As $ is gaining
strength so
CAD. CAD
would continue
to be volatile in
near term.
Canadian Dollar (CAD) would be very
volatile in near term as it sink with the
valuation of Dollar. Overall CAD would
have some impact of Commodities as
well.

Perspective on European Union Currencies – Euro (EUR)
Well as we understand that European Union is facing lots of crisis and European Central Bank
being the first Central Bank who put negative depo rate which effectively means money
should flow deep into the system. Problems of Euro not yet resolved as PIIGS not yet settled
however at the same time we need to appreciate the work done by ECB whereby they never
allowed Euro to trade at 1.05 levels.
Eurozone economy likely to head higher in current year however we need to stress on the
domestic demand like in the case of India, China. There are various headwinds in the markets
which may take valuation of Euro down to 1.05 and out of the same $ Strength would play a
key role here. If $ would continue to have more strength then Euro may fall down.
Sitting today 30th Jan’15 Euro is trading at 1.0831/1.0837 which effectively means if you are
selling 1 Euro then you would be getting 1.0831 $ and if you would like to buy Euro then you
have to shell 1.0837. In the last few weeks Euro being very volatility.
1. Euro is facing MTD ( Month till Date ) volatility of -.27% vs USD
2. Euro is facing 3M ( 3 Months ) volatility of -1.58% vs USD
3. Euro is facing 6M ( 6 Months ) volatility of -1.42% vs USD
4. Euro is facing YTD ( Year till Date ) volatility of -.27% vs USD
One important aspect which all Exporters and Importers should look at is the exit of Britain
from European Union. Well we already saw the impact of the same on GBP and if this would
happen the GBP may go down to 1.35 levels and we would surely see impact on Euro as well.
Well as a Trader we would appreciate the fact that both Euro and GBP are going in tandem
against $. In case of $ Strength both Euro and GBP would move up and in case of $ weakness
both get down.
Forwards Contracts.
(IRP) which is nothing but the difference between Interest Rates of European Central Bank
(ECB) and USD Interest Rates.
which is Euro however if premiums are negative then markets are expecting appreciation in
the base currency which is Euro. Well here we are talking about Commodities Currencies
henceforth spot movement as well as premiums are always volatile in nature henceforth
Options are always advisable for both Exporters as well as Importers.

Looking at the issues European Union is facing since last few years and there is no visibility
that these issues would get resolve soon henceforth all Exporters are advised to cover their
Exports Receivables where in Receivables is in Euro however cost is in some other currencies
at spikes. Well exporters are also advised to use Options Contracts as well regarding covering
of their receivables.
Volatility in Euro – Last 5 Years
Euro would fall to 1.05 levels or may touch parity if GBP would go out of
European Union + PIIGS issue not yet fixed as yet by ECB.

Perspective on European Union Currencies – Great Britain Pound (GBP)
As we understand that UK is facing the biggest question which is whether to exit European
Union or not?? However at the same time Growth prospects of GBP also not sounding very
well and as a Trader we can certainly see the same on valuation of Currency as well. There
was the time when GBP was trading over 1.61 levels which effectively means 1 GBP was equal
to 1.61 $ however over the period of time many issues somewhat relates to Global headwinds
as well took GBP to 1.42 levels and sitting today which is 30th Jan’16 GBP is trading at 1.4245
levels and facing highest volatility amongst all currencies shared above.
Sitting today 30th Jan’15 Euro is trading at 1.0831/1.0837 which effectively means if you are
selling 1 Euro then you would be getting 1.0831 $ and if you would like to buy Euro then you
have to shell 1.0837. In the last few weeks Euro being very volatility.
1. GBP is facing MTD ( Month till Date ) volatility of -3.35% vs USD
2. GBP is facing 3M ( 3 Months ) volatility of -7.67% vs USD
3. GBP is facing 6M ( 6 Months ) volatility of -8.81% vs USD
4. GBP is facing YTD ( Year till Date ) volatility of -3.35% vs USD
One important aspect which all Exporters and Importers should look at is the exit of Britain
from European Union. Well we already saw the impact of the same on GBP and if this would
happen the GBP may go down to 1.35 levels and we would surely see impact on Euro as well.
Well as a Trader we would appreciate the fact that both Euro and GBP are going in tandem
against $. In case of $ Strength both Euro and GBP would move up and in case of $ weakness
both get down.
Forwards Contracts.
(IRP) which is nothing but the difference between Interest Rates of BOE and USD.

Looking at the issues European Union is facing since last few years and there is no visibility
that these issues would get resolve soon henceforth all Exporters are advised to cover their
Exports Receivables where in Receivables is in Euro however cost is in some other currencies
at spikes. Well exporters are also advised to use Options Contracts as well regarding covering
of their receivables.
Volatility in GBP – Last 5 Years
GBP to come down to 1.35 levels soon if UK would quit European Union
which would surely never be a great sign for Euro as well as GBP.

Perspective on Asian Currencies – Japanese Yen (JPY
Abenomics disappointed again this year. GDP contracted in 2Q before rebounding mildly in
2nd half of the year. The objective of having flowing $ Trillions into the economy is good for
nothing and today Japanese Yen is acting as a pup. If $ is gaining strength so would be
Japanese Yen and if it is falling so would be Japanese Yen. In last few course of time Japanese
Yen faced with lots of volatility in the currency markets.
Sitting today Japanese Yen is trading at 121.03 / 121.08 whereby if you are selling $ then you
would be getting 121.03 and if you are buying $ then you have to sell 121.08. Japanese Yen
turning very volatile and purely linked with USD Index.
1. JPY is facing MTD ( Month till Date ) volatility of .45% vs USD
2. JPY is facing 3M ( 3 Months ) volatility of .35% vs USD
3. JPY is facing 6M ( 6 Months ) volatility of -2.33% vs USD
4. JPY is facing YTD ( Year till Date ) volatility of .45% vs USD
Japanese economy suffered many shocks over the past several years including 2008 financial
crisis, the 2011 eastern japan earth quake, the 2012 European Debt Crisis, the consumption
tax hike last year. Solid growth has not returned despite the introduction of Abenomics since
2013.
Forwards Contracts.
(IRP) which is nothing but the difference between Interest Rates of Bank of Japan (BOJ) and
USD Interest Rates.

As a Trader we can clearly see the Implied Vols of Japanese Yen which is over 10% henceforth
it is not advisable to both Exporters and Importers to hedge their exposures using Options
Contracts like Buy Put, Buy Call, Range Forwards (Exporters) and Range Forwards
(Importers).
Volatility in Japanese Yen – Last 5 Years
Abenomics to work soon if Japanese to stay in the Global Financial Markets.
As we aware that another Financial Crisis on the roll and soon we would be
face another big Financial Crisis starting from United States.

Forecast of Currencies ~ DBS Singapore, JP Morgan
Currencies Q1’16 (EOP) Q2’16 (EOP) Q3’16 (EOP) Q4’16 (EOP)
AUD/USD .6500 .6600 .6800 .7000
NZD/USD .5900 .5900 .5800 .5800
USD/CAD 1.3600 1.3600 1.3400 1.3200
EUR/USD 1.0700 1.0500 1.0300 1.0400
GBP/USD 1.5300 1.5400 1.6100 1.6600
USD/JPY 123.00 124.00 126.00 125.00
USD/INR 67.5000 68.6000 69.6000 69.1000
Notes: Forecasts are shared by respective banks like DBS Singapore, JPM.
Notes: - EOP stands End of Period
View of Editorial Desk: - Well we can very well see the huge volatility in the currency pair
during 2016. In that regards Exporters are advised to hedge their forecasted receivables
using Options Contracts like Range Forwards (Exporters), Seagull (Exporters) and Buy Put
Contracts.
Well it is always advisable to Corporate Treasurers to hedge their exposures using Seagull
Contracts when exchange pairs are getting highly volatile. Seagull contracts are nothing but
the sum of Buy Call + Range Forwards (Exporters) or Buy Put + Call Spread.
Risk Management Policies (RMP):-
Well we also need to understand that Risk Management Policy (RMP) of the Hedge Funds,
Banks, Trading Desks, and Corporate Treasuries plays a very important role in the Trading
strategies. Well as we understand that world is almost on the verge of big Neon Swan event
henceforth Hedge Funds Managers, Bankers, Traders and Corporate Treasurers need to start
changing their Hedging Strategies and start taking Options, Exotic Derivatives as to hedge
their Receivables and Payables covering Shorter and Longer tenors.

Financial Derivatives & Analytics
The Financial Derivatives & Analytics helps Hedge Funds, Bankers, Traders, Corporate
Treasurers, Proprietary Traders, and Quants to hedge their Portfolio covering respective
positions in the markets.
Financial Derivatives & Analytics would be targeting all sorts of professionals in the Industry
and over the period of time would sink with our Brand “Foreign Exchange Maverick
Thinkers”. Well a dedicated sub You Tube Channel would get launch covering live video
session of all Derivatives discussed in “Financial Derivatives & Analytics”
Financial Derivatives & Analytics would be covering variety of trading positions in the
Magazine. To name a few:-
Assets Classes Balance Sheet
Positions
Valuation of
Derivatives
Instruments
Business
Consulting
Equity Contingent
Considerations
Put Contracts US GaaP
Debt Call Contracts IFRS
Options Hybrid Securities Range Forwards Indian GaaP
Warrants Seagull Contracts IND-AS
Futures Options Valuations Call Spread MTM Valuations
Swaps Put Spread
Interest Rates
Derivatives
Strategic Hedging Digital Options Contingent
Considerations
Embedded
Derivatives
Ratio Back spread Buyouts
Off Balance Sheet
Exposures
Exotic Derivatives Earn out
Hedge Accounting Intangibles

Valuations of Range Forwards Contracts (Exporters) + Seagull Contracts ~
USD/INR
(Range Forwards, Seagull vs LTFX)
Well today we would be discussing pricing of Cost Reduction Structures (Range Forwards,
Seagull Contracts) along with Long Term Forwards Contracts covering till 5 Years. Well Pls
be note that as per RBI Cost Reduction Structures can't be taken after 2 Years.
India is one of the most conservative Foreign Exchange Markets in Asia Pacific region and
henceforth Singapore is acting as World Financial Centre covering all sorts of Derivatives
which India can’t imagine. Well when it comes to Offshore Treasury Markets then Singapore
is No 1 even better than other Offshore Markets like NY, LLF, Australia and Tokyo.
Pricing of USD/INR LTFX Forwards Contracts keeping spot at 67.82 levels. If today any
exporter would like to price USD/INR Forwards Contracts where by Exporter is selling $ and
buying INR the following are the pricing he would be getting:-
Long Term Forwards Contracts (LTFX) Outright Pricing:-
1 Years O/R Rate (Outright Rate) = 67.82 + 4.1875 = 72.0075
5 Years O/R (Outright Rate) = 67.82 + 19.50 = 87.3200
Pricing of Options Contracts - Range Forwards (Exporters)
Well Range Forwards (Exporters) is nothing but the combination of two legs which is - Buy
Put and Sell Call. Well Buy Put means Exporter is having right to sell $ at an agreed rate to
Bank however Sell Call means Bank is having right to buy from Exporter.
Implied Volatilities of USD/INR taken in Black Scholes Model:-
1 Years Implied Vols - 8.250%
Range Forwards Pricing (Buy Put, Sell Call) - 1 Y till 5 Y.
Range Forwards are priced using Zero Cost Collar Strategy using pricer developed by
“Foreign Exchange Maverick Thinkers” covering all sorts of Derivatives Contracts. Well
valuation of Range Forwards (Exporters) are done at OTMF (Out of the Money
Forward) keeping strike price at 1 Implied Volatility away.

Pricing of Zero Cost Collars (Range Forwards):-
1 Years Range Forwards (Buy Put 66.15, Sell Call 77.12)
Pricing of Seagull Contracts (Seagull = Buy Call + Range Forwards)
Traders note that Seagull Contracts are priced using OTMF Buy Put and OTMF Buy Call.
Well as we discussed earlier during high volatility Seagull is one of the most effective
techniques to hedge both Receivables and Payables.
1 Years Seagull (Buy Call - 77.90, Buy Put - 68.15, Sell Call - 71.75)
Advice from Editorial Desk:-
Well as we understand that markets are getting highly volatile and in that regards both
Exporters and Importers to hedge their receivables and payables and Seagull is one of the
effective derivatives in that regards. Well Corporate Treasurers are advised to hedge their
exposures using OTMF Buy Put and OTMF Buy Call Options Derivatives.
Corporate Treasurers are most welcome to contact Editorial Desk at 91-9899242978 or
email at rahulmagan8@gmail.com in case of any advice.

Valuations of Strip of Buy Put Contracts vs LTFX ~ USD/INR
Well today we are going to discuss Strip (Series) of Buy Put Contracts of USD/INR for
Exporters. Well as we understand that Buy Put is an Options Derivatives Contracts where by
Exporter is having right to sell his $ earnings at an agreed rate (known as Moneyness of the
Options Contracts) with the Bank on agreed date. Settlement of the Buy Put along with other
Options Contracts to be done using Tokyo Cut (3.30 PM Tokyo or 11.30 AM IST)
While doing valuation we are taking current spot rate of 68.05 along with 1 Year Onshore
Premiums of Rs 4.20 henceforth Outright Rate would be 72.25 for 1 Years.
Implied Volatilities for USD/INR are as follows:-
1 Years USD/INR Implied Volatility - 8.425%
4 Years USD/INR Implied Volatility – 10.00 %
Pricing of USD/INR Buy Put Strip ~ 1 Y till 5 Years keeping strike at 62.32 which is Deep
Out of the Money Options (D-OTMF)
1 Years Buy Put Pricing at D-OTMF Strike (62.32) is $ 548
Exporters and Importers to hedge their receivables and payables. If Hedging Policy of the
Corporate don’t allow of having Cost Reduction Structures then Corporate Treasurers should
take Buy Put Contracts where by both downside and upside is protected.
Corporate Treasurers also remembers the fact that aforesaid premiums are almost zero and
in fact Hedge Accounting is allowing you to amortize such premiums in P&L.
Corporate Treasurers are most welcome to contact Editorial Desk at 91-9899242978 or
email at rahulmagan8@gmail.com in case of any advice.

Valuations of Strip of Buy Call Options Derivatives ~ USD/INR
Well today we are going to cover "Pricing of USD/INR Buy Call Options Derivatives Contracts
". Well as we understand that Buy Call is for Importers who would like to hedge their payables
using Options Derivatives Contracts. Well Importers are having Buy Call, Range Forwards,
Seagull to cover their exposures but this article would deal with Buy Call only.
Well sitting today USD/INR Spot Rate is 68.20 and the following are the Onshore USD/INR
Premiums covering 1 Y till 5 Y along with Outright Rate which is sum of Spot Rate +
Premiums.
Long Term Forwards Contracts (LTFX) Outright Pricing:-
1 Years USD/INR Onshore Premiums - Rs 4.16 (O/R = 72.3600)
5 Years USD/INR Onshore Premiums - Rs 20.00 (O/R =88.2000)
Well these all are agreed rate however what would happen if INR would depreciate then the
same Importer who booked Forward Contract is gone henceforth he is advisable to take
Options Contracts which is Buy Call Options Contracts.
Sitting today the following are the premiums to be paid in case Buy Call Contracts by
Importers. Well the amount of premiums paid can be amortized in the books till that time.
Pricing of USD/INR Buy Call Contracts ~ OTMF Contracts
1 Years USD/INR Buy Call Contracts - $ 13,000
Well as an importer you need to understand that you are taking Buy Put contract at strike
rate of OTMF which is 1 Implied Vol away. This would assist you to have an agreed rate in
case of Options Contracts along with protection would be there in case of sudden
depreciation in INR.
Exporters and Importers to hedge their receivables and payables. If Hedging Policy of the
Corporate don’t allow of having Cost Reduction Structures then Corporate Treasurers should
take Buy Call Contracts where by both downside and upside is protected.

Upcoming Trainings of “Foreign Exchange Maverick Thinkers”
Foreign Exchange Maverick Thinkers is launching various Trainings programs at Asia Pacific
level covering the following:-
1. Treasury Workshops
2. Foreign Exchange Workshops
3. Technical Analysis Workshops (Basic Technical Analysis)
4. Technical Analysis Workshops (Advanced Technical Analysis)
5. Frauds & Forensic Accounting
6. Modelling Workshops (Financial Modelling, Cash Flow , Risk Based Modelling)
7. Basel Accord Workshops (Basel I, II , III )
8. Accounting Standards (US GaaP, IFRS, Indian GaaP, IND-AS)
Workshops are getting launched in Delhi, Mumbai, Pune, Hyderabad, Bangalore, Kolkata and
Ahmedabad. Well at Asia Pacific level launching at Singapore, Hong Kong, Malaysia, Australia,
New Zealand, Canada, London and respective countries.
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Good Luck Ladies, Gentlemen!!
Editorial Desk is already in your service..!!
You are always welcome to connect Editorial Desk at 91-9899242978,
Rahulmagan8@gmail.com or Skype Connect ~ Rahul5327.

The Maverick Treasurer Magazine - Jan 2016

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The Maverick Treasurer Magazine - Jan 2016