Case Study Overview

The business is specialty a food importer, with a requirement to purchase Swiss Franks. It has a number of UK customers, including major supermarkets and airlines. Its objective is to gain a competitive advantage in the currency market, especially due to the squeeze on margins with its supermarket business.

Market Outperformance
2 cents
Hedge Tenor
12 - 24 months

The business is able to strongly forecast flows on half of its CHF purchases, which is its higher-margin business. It is, however, in constant renegotiations with supermarkets on the other 50% – this means its selling prices can be volatile as it is expected to pass on cost savings with favourable currency moves. This also means that it needs to be careful that it will not be in a position where it is overedged.

Traditionally using forward contracts to hedge over a 12-month period meant that, although it could guarantee its margins, it found itself constantly making FX losses on its low-margin business.

It also found it difficult to price at competitive levels when losing forward points over the course of the year. This was especially prevalent as it tried to run risk after pricing tightly to get into supermarkets.


Cover a minimum of 50% of exposure over 12-18 months with structures which use time value to achieve an enhanced rate over the spot/forward markets.

This switch created a situation where it could use longer dated trades to its advantage, rather than suffering from the loss of forward points.

If the spot market was to rally significantly, it would take delivery of these trades to pay for high-margin business – it would then have the ability to price new supermarket orders at the more favourable market rate, taking out shorter-dated forwards and basic option trades which allow for protection rates close to market and potential for a small amount of upside.


Longer-dated TARFs and knock-outs, layered with short-dated forward and forward-plus trades. The balance was actively managed with spot trades and market orders when the rate was deemed good. In addition, it has outperformed average spot rates by 2 cents over the past two years since implementing this strategy.

Services provided



Forward Plus


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