BRE Bank will start pitching barrier options in the Polish zloty against the dollar and the euro within the next six months. Piotr Mielus, head of foreign exchange in Warsaw, said it has not offered exotic derivatives before because the underlying foreign exchange spot market was not liquid enough, adding that the zloty has only been fully convertible for one and a half years.
The demand comes from Polish corporates and investors who have told the bank premiums on plain-vanilla options are too high because of high levels of implied volatility, according to Mielus. He thinks most corporates and investors will buy the exotics as part of a structured product. For example BRE Bank may offer a deposit account structured with a double no-touch option, which pays investors a 20% return in dollars on their zloty investment if the zloty and dollar stay within a range but would only pay investors 5% if it touches either barrier.
