A foreign bond (called Yankee bond in the US, Samurai bond in Japan, Bulldog

bond in the UK) is a bond issued in a country's national bond market by an issuer

not domiciled in that country where those bonds are subsequently traded.

 Regulatory authorities in the country where the bond is issued impose rules
governing the issuance of foreign bonds.
 Issuers of foreign bonds include national governments and their
subdivisions, corporations, and supranationals (an entity that is formed by
two or more central governments through international treaties).
 They can be denominated in any currency.
 They can be publicly issued or privately placed.

Eurobonds have the following features:

 underwritten by an international syndicate.

 offered simultaneously to investors in a number of countries at issuance.
 issued outside the jurisdiction of any single country. Therefore, they are not
registered through a regulatory agency.
 in practice they are typically registered on a national stock exchange. Why?
Some institutional investors are prohibited from purchasing securities that
are not registered on an exchange. The registration is mainly intended to
overcome such restrictions. However, most of the Eurobond trading occurs
in the over-the-counter market.
 Make coupon payments annually.

Types of Eurobonds:

 There are a large variety of Eurobonds with different features. For example,
deferred-coupon bonds, step-up bonds, dual currency bonds, etc.
 If an Eurobond is denominated in US dollars, it is called Eurodollar bond.
Example: A US$ bond issued by Ford and sold in Japan.
 "Plain vanilla", fixed rate coupon bonds are called Euro straights, which are
unsecured bonds.
A global bond is a debt obligation that is issued and traded in both the USYankee

bond market and the Eurobond market. Issuers of global bonds typicallyhave high

credit quality, and have large fund needs on a regular basis. Thefirst global bond

was issued by the World Bank. Example: A US$ bond issued bythe Canadian

government, and sold in the US and Japan.

Sovereign debt is the obligation of a country's central government. Compared

withgovernment debt obligations by entities in a particular country, sovereign

debtof that country have lower credit risk and greater liquidity. Government

canraise funds by issuing foreign bonds, Eurobonds and domestic bonds, or

byborrowing from banks through syndicated bank loans.

Governments use the following methods to issue new debt:

 Regular auction cycle/single-price method: this is the same method used

by the US Treasury.
 Regular auction cycle/multiple-price method: this method is similar to the
one used by the US Treasury, except that winning bidders are awarded
securities at the yield they bid, not at the stop yield.
 Ad hoc auction method: auctions are announced when market conditions
are favorable.
 Tap method: bonds from a previously outstanding issue are auctioned.

A Eurobond is an international bond that is denominated in a currency not native to the country
where it is issued. It can be categorised according to the currency in which it is issued. London is
one of the centers of the Eurobond market, but Eurobonds may be traded throughout the world -
for example in Singapore or Tokyo.

Eurobonds are named after the currency they are denominated in. For example, Euroyen and
Eurodollar bonds are denominated in Japanese yen and American dollars respectively. A
Eurobond is normally a bearer bond, payable to the bearer. It is also free of withholding tax.
The bank will pay the holder of the coupon the interest payment due. Usually, no official records
are kept.

The first European Eurobonds were issued in 1963 by Italian motorway network Autostrade.[1]
The $15 million six year loan was arranged by London bankers S. G. Warburg.[2][3]

The majority of Eurobonds are now owned in 'electronic' rather than physical form. The bonds
are held and traded within one of the clearing systems (Euroclear and Clearstream being the most
common). Coupons are paid electronically via the clearing systems to the holder of the Eurobond
(or their nominee account).

The Eurobond market is made up of investors, banks, borrowers, and trading agents
that buy, sell, and transfer Eurobonds. Eurobonds are a special kind of bond issued by
European governments and companies, but often denominated in non-European
currencies such as dollars and yen. They are also issued by international bodies such as
the World Bank. The creation of the unified European currency, the euro, has stimulated
strong interest in euro-denominated bonds as well; however, some observers warn that
new European Union tax harmonization policies may lessen the bonds' appeal.

Eurobonds are unique and complex instruments of relatively recent origin. They
debuted in 1963, but didn't gain international significance until the early 1980s. Since
then, they have become a large and active component of international finance. Similar to
foreign bonds, but with important differences, Eurobonds became popular with issuers
and investors because they could offer certain tax shelters and anonymity to their
buyers. They could also offer borrowers favorable interest rates and international
exchange rates.

DEFINING FEATURES

Conventional foreign bonds are much simpler than Eurobonds; generally, foreign bonds
are simply issued by a company in one country for purchase in another. Usually a
foreign bond is denominated in the currency of the intended market. For example, if a
Dutch company wished to raise funds through debt to investors in the United States, it
would issue foreign bonds (dollar-denominated) in the United States. By contrast,
Eurobonds usually are denominated in a currency other than the issuer's, but they are
intended for the broader international markets. An example would be a French
company issuing a dollar-denominated Eurobond that might be purchased in the United
Kingdom, Germany, Canada, and the United States.

Like many bonds, Eurobonds are usually fixed-rate, interest-bearing notes, although
many are also offered with floating rates and other variations. Most pay an annual
coupon and have maturities of three to seven years. They are also usually unsecured,
meaning that if the issuer were to go bankrupt, Eurobond holders would normally not
have the first claim to the defunct issuer's assets.

However, these generalizations should not obscure the fact that the terms of many
Eurobond issues are uniquely tailored to the issuers' and investors' needs, and can vary
in terms and form substantially. A large number of Eurobond transactions involve
elaborate swap deals in which two or more parties may exchange payments on parallel
or opposing debt issues to take advantage of arbitrage conditions or complementary
financial advantages (e.g., cheaper access to capital in a particular currency or funds at a
lower interest rate) that the various parties can offer one another

Vanilla Forex Options

Plain vanilla options refer to standard forex options types: they are defined by a standard strike
price and expiration date and refer to the buying or selling of a standard call or put option.
They give the buyer (holder) the right, but not the obligation, to buy or sell a set amount of
currency at a certain rate and before a certain date. For this right, the holder of the options
contract pays the premium (option price) to the seller (writer). According to evolution of the
market and the profitability of the option, the holder of the option contract will decide to
exercise or not his option. On the Finotec Trading Platform, traders may buy or sell call and
put options. Note that put and call options are two separate contracts different from one
another and not the other side of the same transaction.
Call option

A forex call option gives the buyer the right, but not the obligation, to buy a predetermined
amount of currency from the options contract seller at a set rate (the "strike price”) and before
a specific date (the expiration date). In the case of a regular call option, the buyer believes that
the rate will go up and will want to buy it at lower price. For that right, the buyer will pay the
premium.
Put option

A forex put option gives the buyer the right, but not the obligation to sell a predetermined
 amount of currency at a set price (strike price) and within a specific time (before or on the
expiration date). The buyer believes that the rate will drop below the strike price before the
expiration date so he’ll want to sell it at a higher and not lower rate. In return for this right, the
buyer pays the premium to the writer.
Option Strategies

Traders make their own option strategies by combining different options. With Finotec, two
option strategies are directly available from our platform: the strangle option strategy, and the
straddle option strategy. Both these strategies are a combination of two vanilla options. This
means that you don’t have to open two options separately to implement either of those
strategies, you just click “strangle” or “straddle” and fill in the requested inputs and both
options will open automatically at the same time.
Strangle Strategy

This options strategy consists in buying or selling a call and a put option at different strike
prices. A trader will get a long strangle option (buy) in expectation of a sharp swing of the
exchange rate in either direction. The long strangle strategy has unlimited profit potential if the
exchange rate moves enough in either direction. The value of a strangle option increases along
with the volatility of the underlying currency pair.
Straddle Strategy

This is another type of option strategy and it consists in buying (long straddle) or selling (short
straddle) both a call and a put option at the same strike price and for the same expiration date.
A trader will get a long straddle option (buy) when he/she expects highly volatile market
conditions. The value of a straddle option (premium) increases along with the volatility and
the maturity of the underlying currency pair.
Barrier Option
Barrier options belong to the category of exotic options – extremely popular among forex
option traders – meaning that they possess a component other than the expiry date and the
strike price. Regarding barrier options, the additional component is the trigger – or the barrier
– which if reached either brings the option into being (knock in option) or cancels it (knock
out option). You thus choose a strike price as well as a trigger. Since there is a chance that
these options may never come into effect or may be canceled, they are generally cheaper that
their vanilla counterpart. Exotic options also include binary options which are based on a
hypothetical scenario where you decide how much profit you want to make if the rate reaches
a certain level.
Knock in

A knock-in option becomes a regular option (it is "knocked in”) if and when the trigger price
is met before the expiration date. This means that if the rate is never reached, the contract is
canceled and the buyer loses the premium. If the barrier rate is met, then the option starts
running like a regular put or call option. Knock-in options are less expensive than regular
options since they have an additional conditional component that cheapens the price of the
 premium. The further the barrier to the spot rate, the cheaper the premium, since there is a
lesser chance that the option will be knocked in before the expiration date.
Knock out

The knock out option will automatically cease to exist and expire worthless (it will be
"knocked out”) if and when the trigger price is reached before the expiration date. If the rate
never hits the barrier, the knock out option runs the same way as a regular option. For a call
knock-out option, the trigger is set below the spot rate, and above for a put (out-of-the-money).
The higher the implied volatility, the greater the chance the barrier being triggered and the
option being knocked out. Knock-out options are cheaper than regular put or call option
(vanilla) since they may be knocked out before expiry. The premium gets cheaper as the
barrier gets closer to the spot rate since the option has a greater chance of being knocked out.
Reverse knock in

The difference between a knock in option and a reverse knock in option lies in the localization
of the trigger barrier. Whereas the trigger is out-of-the money for a knock in, it is in-the-
money for a RKI.
Reverse knock out

The difference between a knock out option and a reverse knock out option lies in the
localization of the trigger barrier. Whereas with a regular knock out, the trigger is set out-of-
the-money (meaning below the spot rate for a call and above for a put), with a RKO, the
trigger is set in-the-money (above the spot rate for a call and below for a put).
Read more about Barrier Option Back to top
Binary options
Binary options (also known as "rebate” options), are vanilla put and call options conditioned
by something else other than just the price and the expiration date. They refer to conditional
scenarios that if come true, either validate or invalidate the option. The trader fixes the amount
of the desired payout he will get if his conditional scenario proves to be right. The price of the
option or premium represents a percentage of that payout.
One Touch

When buying a one-touch option, traders set that if the currency trades at a
specified rate (trigger), then he/she will receive a profit whose amount he has
decided upon. He thus knows in advance the extent of his potential profit
(payout) and loss (the premium).
No Touch

When buying this type of option, the trader sets that he/she will make profit
(whose amount he/she sets) if and only if a currency rate does not reach the
specified trigger before a specified time. The further away the trigger from the
spot rate, the lesser payout potential, since there is greater probability that the
currency will not touch the strike rate.
Double One Touch

With this type of option, traders choose two triggers and set the profit they will
make if either one is hit. Usually, double-one-touch options are used when
traders expect highly volatile market conditions but don’t know what direction
the market will take. In this sense, double one touch options are similar to long
straddle or strangle options.
Double No Touch

Double no touch options are the opposite of the double one-touch options.
Traders buy them when they expect a range-bound market with a relatively low
volatility. In general, this type of option is profitable during the periods of
consolidation that usually follow significant market moves.
Traders often combine various option types to build their option trading
strategies. By associating different option types, some traders manage to
minimize the risk they are taking. Some even claim to have found infallible
methods. Others see it as a simple hedging instrument and use it to secure their
funds.