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fx forward leverage
Posted: July 6th, 2012, 5:33 am
by kremer
Hi,What is the leverage ratio on a OTC fx forward contract(lets say buy 1million usd and pay 1.85 million TRY)? As I do not pay anything I guess it is infinite or do I miss something entirely? Thanks in advance,
fx forward leverage
Posted: July 6th, 2012, 7:16 am
by acastaldo
QuoteAs I do not pay anything I guess [leverage] is infiniteMaybe, in theory. But more likely the bank will require you to put up a small amount as a 'guarantee' or 'collateral' before they enter into a forward agreement with you.
fx forward leverage
Posted: July 6th, 2012, 12:19 pm
by nike61062x
You will have to post collateral against the MTM of the position
fx forward leverage
Posted: July 6th, 2012, 1:39 pm
by kremer
even MTM=0, counterparty(in this case the Bank) requires a collateral.Then, how much(what percentage) of the MTM should be sent to the bank as collateral? Is this percentage(amount) differs from one bank to another?
fx forward leverage
Posted: July 11th, 2012, 8:46 pm
by giladr
It's usually around 1-2% margin + MTM.Some banks will obviously be more aggressive and some careless... it depends on how big you are, how well the bank knows you, what positions you take, what VaR, etc... but usually 1-2 pct is a good bet.
fx forward leverage
Posted: August 3rd, 2012, 6:15 am
by skullx
QuoteOriginally posted by: giladrIt's usually around 1-2% margin + MTM.It's for major currencies. For emerging it's usually more.