Ongoing trade managent

Funding or financing?
The need for funding or financing depends on the nature of the OTC derivative product. Currency forwards do not require the borrowing or lending of funds unless the forward is part of a strategy involving the requirement of the currency itself. A currency swap, in which funds are borrowed from a foreign bank as a loan, is a form of financing. Only OTC derivatives that involve the exchange or movement of actual principal require financing, or can be used for funding other efforts.



Many OTC derivatives are settled by the delivery of an actual asset.