Illustrative example of a CLI
Base | USD 100,000 |
Alternate currency | AUD |
Current AUD/USD exchange rate | 0.9067 |
Strike rate | 0.8917 |
Tenor | 1 Month |
Enhanced yield | 6.5% p.a |
Benefits of CLIs
Potential Yield Enhancement Investors may earn an enhanced return if their view of exchange rate movements are accurate. | ||
Tailored to the Investor's Needs Can be tailored to suit investors’ needs, based on their currency pairs, the strike rate, and tenor. | ||
Short Investment Tenors A CLI’s tenor is generally short term, ranging from 1 week to 6 months. | ||
Wide Range of Currencies to Choose from In deciding the currency pairs, investors can choose from a variety of currencies, including AUD, CAD, CHF, EUR, JPY, NZD, SGD, and USD. |
Risks of CLIs
Foreign Exchange Risk Investors face the risk of having their base currency converted to the alternate currency at a rate lower than the market at maturity. | ||
Liquidity Risk CLIs are meant to be held to maturity. Early withdrawal may result in investors receiving less than their principal amount. | ||
Issuer Risk CLIs are issued by financial institutions and investors are exposed to the issuers credit risk. |
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