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New Hedging Option Introduced by Treasury

Treasury has gone for a new hedging option with HSBC Bangladesh. ACI Central Treasury made its mark by striking a deal of Seagull Option, a hybrid risk hedging derivative which is first of its kind in Bangladesh. The deal was made for import of Capital Machineries for our new ACI Salt project. It is a three legged product that offers hedge against undesirable changes in the price of underlying liability in both directions (upward and downward) after a certain strike limit.

ACI Treasury, a pioneer in introducing new financial derivative products is looking for derivatives which will be most beneficial to protect and minimize the risk of currency devaluation especially for Salt's new project machinery. Almost all foreign banks was approached to come up with a dynamic financial derivative solution which can be conveniently exercised matching with shipment schedule without any cost of premium.

ACI Treasury, in the meantime, monitored foreign currency movement particularly EURO-Dollar through various analytical tools and found that Seagull Option allowed secured interest. The product was designed as zero cost, an exception from a conventional plain forward transaction. Further study revealed that there was a strong probability of EURO-Dollar exchange rate rise in the near future and immediately checking our perception with all leading Foreign Banks, we finally decided to go with HSBC.

Due to the need for approval from Bangladesh Bank, several meetings with them were arranged. It was to convince them of our understanding of Global Forex money market behavior. Finally, Bangladesh Bank approved the product.

On May 2011, ACI entered into the Euro-Dollar "Seagull" option hedging with HSBC Bangladesh, a part of the LC valuing EURO 0.60 Million and in addition we receiving dividend for exercising the product. ACI Treasury earlier used different cross-currency options to hedge currency risk with HSBC, Standard Chartered Bank and Citibank, N.A.