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.
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