Chennai, April 8
The deal was entered when the US $-Swiss Franc (CHF) was 1.2355 (spot rate). The terms were that if the rate of USD/CHF moves 30 pips (defined as the smallest price increment in forex trading) up or down to touch 1.2385 or 1.2325, the company will get $100,000 instantly only once.
If the USD/CHF rate touches 1.2385 (knock-out rate), the entire deal will get knocked-out (closed) with no further liability on either party.
If during the entire tenure of the deal the rate of USD/CHF never touches 1.2385, the company will get $100,000.
The term of the deal includes two periods – June 22, 2007 to June 19, 2008 (first fixing date) and June 22, 2007 to June 15, 2009 (second fixing date).
If the rate of USD/CHF touches 1.1250/1.200, the company will have to buy $20 million at each fixing date at the rate of 1.33 (that is, total of $40 million).