Question about Snowball, Target Redemption Forward
What is a snowball? What is a target redemption forward?
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A Snowball belongs to a class of products that offers a series of monthly USD sale contracts with better-than-market USD sale price
initially. The distinguishing feature of a snowball is that, while the monthly USD sale amount is fixed at a constant USD amount, the USD sale price
can be adjusted repeatedly downward depending on some conditions.
A target redemption forward, also known as TARN and TRF, belongs to a class of products that offers a series of monthly USD sale
contracts with better-than-market USD sale price initially. The distinguishing feature of a target redemption forward is that while both the
monthly USD sale amount as well as the USD sale price are fixed throughout the entire term, it has an early termination provision that limits the
maximum profit the USD selller can make, while it does not cap the loss the USD seller can make.
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