Amortising FX Forward
One exchange rate for regular payments and collections.
Do you not know the exact settlement date of an overseas invoice, yet still need to protect your profit margin from exchange rate fluctuations? Don’t wait until adverse currency movements erode part of your margin.
The Amortising FX Forward (AF) is designed for companies involved in importing or exporting that need to manage foreign exchange risk. Currency movements can significantly affect the profitability of transactions within a short period of time, and AF helps protect your margins against such volatility. In highly competitive markets, even relatively small exchange rate changes can lead to lower profits, increased pressure on cash flow, and challenges in financial planning.
AF helps bring greater stability to your business. It allows you to secure an exchange rate in advance while avoiding the constraint of a single fixed settlement date, providing greater flexibility in managing your international payments and receivables.
We’ll call you back and recommend the most suitable hedging solution for your business, tailored to your cash flow requirements and designed to meet your specific needs.
Comparison of Standard and Amortising FX Hedging
| Standard FX Forward | Amortising FX Forward | |
|---|---|---|
| Trade Date | 1 July | 1 July |
| Hedged Amount | EUR 100,000 | EUR 100,000 |
| Forward Rate | 25,00 EURCZK | 25,00 EURCZK |
| Settlement | 30 September | Any time between 1 July and 30 September |
Typical Situations Where an AF Makes Sense
You do not know the exact date when invoices will be paid
Invoices are settled gradually throughout the month
You want a single exchange rate for multiple payments
You need to protect both your profit margin and cash flow
You do not want to arrange multiple forward contracts separately
Instead of entering into several individual transactions, you have a single hedging arrangement that can be drawn down gradually as needed.
Citfin Tip: With an AF, instead of managing multiple individual forward contracts, you have a single hedging arrangement that can be drawn down gradually as needed. This reduces administrative complexity and helps minimise the risk of errors when managing your foreign exchange transactions.
How an AF Works in Practice
| Order Secured | 1 July |
| AF Agreed | 1 July |
| Hedged Exchange Rate | 25,00 EURCZK |
| Hedged Amount | 100 000 EUR |
| Latest Settlement Date | 30 September |
| Settlement No. 1 | 28 July, EUR 22,385 |
| Settlement No. 2 | 17 August, EUR 38,466 |
| Settlement No. 3 | 19 September, EUR 15,712 |
| FX Swap | Rolled Over to 31 October, EUR 23,437 |
| Settlement No. 4 | 22 October, EUR 23,437 |
1) Order Secured – On 1 July, your company secures a contract with a German business partner. You know that payments in euros for the goods you export will be received over the coming weeks or months, but the exact payment dates are uncertain. This is the point at which foreign exchange risk arises. If the Czech koruna strengthens, you may receive fewer koruna when converting your euros than you currently expect.
2) AF Agreement – You enter into an Amortising FX Forward (AF) with Citfin and lock in an exchange rate for future currency conversions. From that moment on, you know exactly the rate at which your euros will be exchanged, regardless of subsequent market movements.
3) Settlement – Part of the euro proceeds arrive from Germany at the end of July, additional payments are received in August, and the remainder in September? No problem. An AF allows the hedge to be settled gradually, either in portions or in a single transaction. You simply draw down the hedged amount in line with your actual cash flow.
4) Peace of Mind and Greater Certainty – You do not need to monitor exchange rates every day or worry about a stronger Czech koruna reducing your profit margin within a matter of weeks. With an AF, your exchange rate is fixed in advance, giving you greater certainty for financial planning, better control over cash flow, and significantly less administrative burden.
5) Roll-Over – If payment dates are delayed and part of the hedged amount cannot be settled within the original period, we can arrange an FX Swap to roll the remaining balance forward to a new settlement date. This allows the hedge to remain aligned with your actual cash flow while preserving your exchange rate protection.
An AF is ideal for businesses that operate in the real world, where payment timings do not always follow a fixed schedule.
Benefits of an Amortising FX Forward for Exporters and Importers
One hedge can cover multiple payments over an extended period
Flexibility to draw down the hedge gradually as payments are received or made
No need to know the exact due dates of invoices in advance
Protection of profit margins against adverse exchange rate movements
Improved cash flow planning and greater certainty over business costs
You know today the exchange rate at which you will convert currencies in the future
First Time Hedging FX Risk? Here’s What You Need to Know
Entering into an FX hedging arrangement is simpler than many businesses expect. Companies often assume that currency hedging involves complex processes, extensive paperwork, or sophisticated financial products. In reality, the goal is quite the opposite — to provide greater certainty, stability, and control over future cash flows.
Master Agreement. A master agreement is required before entering into forward contracts. Citfin will guide you through the entire process and help ensure everything is set up correctly.
LEI Code. European regulations require companies to have a Legal Entity Identifier (LEI) when entering into FX hedging transactions. If you do not yet have an LEI, Citfin can assist you with the application process.
Your Dedicated Dealer. Your dealer works with you on the practical aspects of managing currency risk, including market developments, hedge utilisation, settlement roll-overs, and the overall structure of your hedging strategy. It is not just about executing a transaction; it is about helping your business manage foreign exchange risk over the long term.
Every Business Is Different. Not sure whether an AF is the right solution for your business? Looking for a different hedging product, an FX Option, or an option strategy? No problem. Every company operates differently. Some require a fixed settlement date, while others need maximum flexibility. Since 1996, we have been helping businesses implement hedging solutions tailored to their payment schedules, cash flow requirements, and business models.
Important Risk Information. Risks arise primarily from future market developments and from the obligation to settle the transaction under the agreed terms. Before entering into an Amortising FX Forward (AF), we will explain how the product works, its key features, and the potential risks involved, ensuring you have the information needed to make an informed decision.
Not sure which type of forward contract is right for your business?
Leave us your contact details or speak directly with one of our specialists.
During a short consultation, we will assess whether a Standard FX Forward,
an Amortising FX Forward (AF), or another FX hedging solution is the most
suitable option for your business.
Tel.: 234 092 020
email: jiri.rys@citfin.cz
FAQ – Frequently Asked Questions
An Amortising FX Forward (AF) is a foreign exchange hedging solution that allows businesses to secure an exchange rate for multiple future payments or receipts within a single agreed period. Compared with a standard FX forward, it offers greater flexibility by enabling the hedged amount to be drawn down gradually as transactions occur.
An Amortising FX Forward (AF) is a foreign exchange hedging solution that allows businesses to secure an exchange rate for multiple future payments or receipts within a single agreed period. Compared with a standard FX forward, it offers greater flexibility by enabling the hedged amount to be drawn down gradually as transactions occur.
An AF is particularly suitable for exporters and importers that regularly receive or make international payments but cannot accurately predict the exact date of each individual transaction. It is commonly used by businesses with recurring foreign trade activities and ongoing foreign currency exposure.
A Standard FX Forward is designed for businesses that know the exact settlement date of a future transaction. An Amortising FX Forward allows the hedged amount to be utilised progressively throughout the agreed period, providing greater flexibility while maintaining exchange rate protection.
The best approach is to consult an FX hedging specialist. Based on your foreign currency payments, receivables, cash flow profile, and business plans, they can recommend the most appropriate solution for managing your exchange rate risk.
The hedging period depends on the company’s individual needs. Forward contracts can be arranged for periods ranging from several months to longer-term horizons, reflecting planned international payments, receivables, and business requirements.
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