FX Forward Contracts With Daily Drawdown (NARC)
Hi all,
I was just curious whether or not I can get FX Forward contract for emerging market currencies, say the Sri Lankan Rupee (LKR) & Colombian Pesos (COP).
I am in specific interested in Forward rates with daily drawdown where the difference in swapped between dealers daily.
Currently discussing two local dealers in these countries who are both bullish on their currency & are willing to give me quotes for NARC daily swaps. I must say I was a bit baffled on their quotes and liquidity margins and wanted to know how they managed to calculate that. Maybe I am not seeing something here. Likelihood of approaching another dealer outside the country to get contrasting quotes and getting volatility?
In both these scenarios, I could only make sense of:
Both these countries being emerging markets with foreign direct investment scope on them in 2010 thus a greater and likely bullish by local market maker dealers to buy the currency.
In case of Colombia, what struck me as peculiar was even the central had to intervene in the local pesos appreciation by buying dollar from the market thus smoothing the steam. How far can central banking in emerging markets go in doing this and can a major dealer or even Hedge fund bet against this in one direction or other bringing about a catastrophe and making a killing while at it? Can a buy side analyst work with structured sales side and come up with new exotic products to possibly either sell the product to institutional and even retailer dealers?
Would liquidity be a problem in trading these products?
Role of correlated weighted indices?
The legality and credit issue of doing this as an individual? Heck can a layman like me trade these products from my garage or am I better off approaching dealers or even boutiques and pitching them the idea. Maybe if I can sell them a good story might end up getting an entry level sales job.
Am I even making sense here? Your feedbacks are appreciated.
Bump
i don't trade fx, but to can try to help. I believe these will trade as ndf's, and you would have settlement at the value date.
I have no idea what size you're trying for but liquidity would be poorer than the g7 even in spot/fwd and especially in anything exotic.
and this "a major dealer or even Hedge fund bet against this in one direction or other bringing about a catastrophe and making a killing while at it" is a little bit sick isnt it?
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