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Treasury Products - Risk Management
TCV offers an extensive range of treasury products, which can be tailored to suit specific client requirements. TCV’s treasury products include interest rate and foreign exchange risk management tools.
Extensive Risk Management Tools
TCV's risk management products provide our clients with the flexibility to manage interest rate and foreign exchange risk exposures in line with their strategic objectives. TCV works with clients to gain a close understanding of their business cash flows and risk preferences. Clients benefit from our established expertise and have access to a full range of up-to-date risk management products.
Key features:
• a full range of hedging instruments
• competitive market rates and low fees
• risk management advice and hedging analysis
• access to market risk management techniques
• easily understood documentation and efficient settlements.
Interest Rate Risk Management
TCV is able to provide the following interest rate risk management products, enabling our clients to minimise exposure to unfavourable interest rate changes:
• Interest Rate Forwards
TCV’s Interest Rate Forwards enable clients to hedge short-term interest rate exposures. Interest Rate Forwards replicate the Bank Bill Futures traded on the Sydney Futures Exchange. TCV makes available four consecutive Interest Rate Forwards at all times, therefore providing clients with protection against movements in interest rates for up to one year.
• Forward Rate Agreement
A Forward Rate Agreement (FRA) is an agreement between TCV and a client wishing to protect itself against a future interest rate movement for a specified period at an agreed rate. A FRA operates like an Interest Rate Forward, but with greater flexibility. There are no restrictions on the start date and term and they can be negotiated to precisely match a client’s short-term hedging need.
• Interest Rate Options
Interest rate options are tailored to the needs of each client, with bill options available to hedge short-term interest rate exposures and bond options used to hedge long-term interest rate exposures. Options provide protection against interest rate movements and are effectively an insurance policy for which a premium is paid.
• Vic Hotstock Forwards
Vic Hotstock Forwards enable clients to enter into financial arrangements that hedge long-term interest rate exposures. Vic Hotstock Forwards are based on underlying TCV Hotstocks. Pricing is consistent with TCV inscribed stock and based on forward contracts calculated from the spot TCV yield curve.
Foreign Exchange Risk Management
TCV is able to provide foreign exchange risk management products for clients with foreign exchange risk exposures. This exposure may occur, for example, due to foreign exchange receivables or payables. TCV offers the following foreign exchange rate products:
• Spot Foreign Exchange Rate Contracts
Spot foreign exchange rate contracts provide for the immediate exchange of foreign currency cash flows into an alternative currency. A spot foreign exchange rate transaction will involve the purchase or sale of foreign exchange at a rate that is agreed today for physical delivery in two business days.
• Forward Foreign Exchange Rate Contracts
Forward foreign exchange rate contracts provide for the exchange of foreign currency cash flows into an alternative currency on a future settlement date (beyond two business days). Forward foreign exchange rate contracts reduce uncertainty about the value of future cash flows.
• Foreign Exchange Options
Foreign exchange options are an alternative means of managing foreign exchange exposures. Call options give purchasers the right to buy currency at a fixed price, while put options give the purchaser the right to sell currency. Foreign exchange options can be regarded as a type of insurance against future currency movements and may be purchased by paying a premium.
If you would like to know more about TCV’s range of treasury products and services, please contact us or telephone (+61 3) 9650 7577.
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