Asia Financial Holdings, a Hong Kong-based financial company whose subsidiaries include Asia Commercial Bank and Asia Insurance, with over HKD20 billion (USD2.5 billion) in assets, is planning to use over-the-counter foreign exchange options for the first time. The firm will primarily trade options for speculative positions as a way of increasing its revenue streams, but it will also use them as a hedging tool on its USD400 million global bond portfolio. "This will be for hedging exposure as well as for speculation," said Vinson Lei, treasury manager.
The firm started trading foreign exchange swaps last year and is moving into options now that it has gained experience with swaps. Lei predicted it will take 12 months to make its first trade as it has to update its systems.
In a typical trade the company will look to buy or sell options on the group of three currencies, primarily for speculation. "This will create more opportunities for profit," said Lei.
The firm also trades equity futures and its counterparties for all derivatives transactions are the major derivatives houses. He singled out HSBC and Citibank as its two main counterparts. Officials at HSBC and Citibank declined comment.
