Range Forward

An FX collar using forward contracts that replicates the payoff profile of purchasing an in the money call and selling an in the money put. For example if the forward price for sterling is $1.50, a range forward can be produced by buying a forward contract to purchase sterling at $1.50, entering a forward contract where the buyer has the right to break the contract at a price of $1.43, and the seller of the forward contract has the right to break the contract at a price of $1.56.