Dual Currency Deposit

Dual Currency Deposit Strategy

The dual currency deposit strategy lets the customer receive an enhanced yield on a USD deposit beyond the regular deposit rate. This is in return for agreeing to receive the deposited amount in another predefined currency at a predefined exchange rate (the conversion rate) at some future point in time (the expiry date).

As long as the spot rate of the USD against the JPY does not trade beyond the conversion rate on the expiry date the customer benefits from an improved (higher) interest rate. If on Tue, 26 Aug 2011 date the spot rate trades beyond the conversion rate, the customer receives the enhanced yield but the deposit is not repaid in the original currency. It is converted into the other predefined currency at the conversion rate before being repaid. This structure is composed from the following option: The customer is selling a Vanilla Call USD / Put JPY with a strike of 200.00. This option expires on Tue, 26 Aug 2011.

Dual Currency Deposit Pricing Parameters

Spot: 94.300 Delivery Date: Thu, 28 Oct 2010 Amount: USD 22,000,000 Strike Price: 200.00 Determination of Payout (Expiry Date): Tue, 26 Oct 2010

Dual Currency Deposit Advantages

You will receive an enhanced rate in comparison to the regular deposit rate. If the market trades below the conversion rate of 200.00 at expiry you will benefit from the enhanced deposit rate and maintain your deposit in the original currency. You can set the conversion rate in advance, according to your view on the market.

Dual Currency Deposit Risk

The dual currency deposit lets the investor take advantage of any USD/JPY depreciation as well as appreciation down 200.00. This enables the customer to be paid a higher rate on the deposit. If however the market level is hit, the investor will receive the deposit back in JPY instead of USD.

Possible Results at Expiry

If the spot trades below 200.00 at expiry, you will receive an enhanced rate of 2.7218% on your USD deposit instead of the current money market rate and you will receive your deposit amount back in the original currency. If the spot trades above 200.00 at expiry, you will receive an enhanced rate of 2.7218% on your JPY deposit but you will receive your deposit amount back in USD (this conversion is carried out at the predefined conversion rate).

Dual Currency Deposit Summary

The Target Redemption Forward structure lets the TARN buyer hedge against any USD/JPY market fluctuation until the Redemption Target is met. The buyer of the TARN is also selling Vanilla options that could be exercised if in the money. Once the target is met the structure ceases to exist and the buyer has to hedge at prevailing market rates.