Reduce an existing forward after the expected receipt changes

In a separate constructed case, a forward already requires delivery of 100 foreign units for 90 home units on day 30. It was based on forecast orders. At the new decision date, day 15, the revised orders support a receipt of only 60 foreign units on day 30; the other 40 were uncontracted forecast sales, so no customer claim for them exists. This differs from partial payment of an existing invoice. Assume the stated 60 is collected in both compared scenarios.

A new forward for the same settlement date is quoted at 1.00 home per foreign unit. With zero discounting for this contract-value comparison, the old sale at 0.90 has value 100 × (0.90 − 1.00) = −10. The bank offers an amendment that, once agreed and paid on day 15, extinguishes 40 of the delivery duty for a payment of 4 plus a new charge of 0.40. The remaining duty is to deliver 60 for 54 on day 30, with current value −6. The payment 4 settles the removed portion’s existing value; 0.40 is the additional amendment cost.

The corporation has usable home cash 5 and a separate collateral claim of 10 already posted before day 15. Under the stipulated arrangements, continuing leaves all 10 blocked until completed settlement on day 30. The amendment returns 4 on day 16 and retains 6 until completed settlement on day 30. No further collateral calls occur in these compared paths. An unrelated committed home receipt of 50 arrives on day 20. The cash reserve is 2 throughout. All parties perform the stated payments and collateral releases; there are no taxes or other flows. An initial dealing fee of 0.20 was paid before day 15 and is already reflected in the opening cash.

Continue the original forward. Home cash becomes 55 on day 20. On day 30, buy the missing 40 foreign units before delivering 100. At a spot rate of 0.80 this costs 32; at 1.20 it costs 48. Even the larger purchase leaves usable cash 7 before the forward receipt. Receipt of 90 and return of collateral 10 then leave 123 or 107. Continuing requires no new day-15 payment, but retains the price exposure on the excess delivery quantity.

Accept the amendment. Paying 4.40 immediately from cash 5 would leave 0.60 and breach the reserve. An obtainable bridge advances 1.40 net on day 15 and requires repayment of 1.50, including its charge, on day 20. The cash path is 5 + 1.40 − 4.40 = 2 on day 15; 6 after the collateral return on day 16; and 6 + 50 − 1.50 = 54.50 on day 20. On day 30, deliver the collected 60 for 54 and receive the remaining collateral 6. Ending home cash is 114.50 in either spot scenario.

If the objective is at least 110 of ending cash in both scenarios while maintaining reserve 2, the funded amendment meets it and continuing does not. If the bridge is unavailable, the amendment on these payment terms is infeasible. If the released collateral 4 is instead actually usable before the amendment payment, the bridge is unnecessary and ending cash is 114.60. That changed timing saves the bridge charge; returning already owned collateral is not a new hedge profit.

The later choice retains the old loss and its remaining contractual effect. It does not recreate an initial choice of a forward for 60 at today’s rate without paying for the old position. FIN.13 receives the reduced delivery exposure; FIN.2 receives the amendment payment, collateral dates and bridge repayment; FIN.15 obtains the actual amendment effect and performs the funded actions.