Let’s go into the details of the bank’s very first DCI deal.
It all started with Edgar (not his real name), one of our HNWI clients in the countryside. Edgar is in the business of processing and exporting vegetable oil, coconut oil, and other agricultural by-products.
This provides Edgar with a natural source of foreign currency cash flow, particularly US dollars (USD). However, this also means that he needs to regularly convert his dollar revenues into Philippine pesos (PHP) to settle various operating expenses such as employee salaries, utilities, taxes, and more.
Our Private Wealth and Investment Distribution teams put two and two together – Edgar clearly has dollars in excess investible funds, and he doesn’t mind receiving pesos in the future. This made him a suitable candidate for the very first DCI deal.
On May 26, 2026, Edgar invested USD 1,000,000 in a two-week DCI to expire on June 8, 2026. The product gives him a net effective return of 10.986% per annum, which, as of this writing, is unattainable in other traditional investments for the same tenor.
However, there’s a catch – at the time of dealing, the prevailing USD/PHP exchange rate was 61.55 and Edgar agreed to set a strike rate that is 30 centavos higher at 61.85.
What is the significance of this strike rate? Under the terms and conditions of this specific DCI, if the USD/PHP exchange rate on expiry date is greater than 61.85, then Edgar is obligated to convert the entire USD 1,000,000 into pesos at the rate of 61.85.
He will still receive a dollar payout of 10.986% per annum, but will be left holding PHP 61,850,000 instead of his original principal.
On the other hand, if the USD/PHP exchange rate on expiry date remains below the strike rate of 61.85, then Edgar will receive the dollar payout and his original principal of USD 1,000,000.
