Working Papers‎ > ‎

Working Paper Details

Title Reducing Foreign-Exchange Exposure through
REDUCIN (Reverse Dual-Currency Indexed-Note)
Authors Banikanta Mishra
Type Working Paper
Publication Date 09-Nov-2012
Year 2012
Abstract In this paper, we develop a new financial instrument, REDUCIN (Reverse Dual-Currency Indexed-Note), which is a combination of Reverse Dual Currency Note (RDCN) and Indexed Currency Option Note (ICON). Like a RDCN, the REDUCIN pays interest in one currency and the face-value in another. In addition, like an ICON, the face-value paid at maturity is linked to a spot exchange-rate at that point. We also highlight how to value – using desynthesis - a REDUCIN. We show how this instrument protects an exporter against a depreciation in the foreign-currency against her home-currency. We also develop a variation of REDUCIN and show how to desynthesize and value it.
Click here to download the fileReverse-Dual-Currency-Indexed-Note.pdf