“Accumulator Forward”

definition

An accumulator forward, also known as a share forward accumulator or simply an accumulator, is a financial derivative that obliges the issuer to sell and the investor to buy a specific stock or security at a predefined strike price. As the strike price is normally settled periodically, the investor accumulates holdings in the underlying security for the duration of the contract, generally up to a year.

Due to their complex nature, accumulator forwards are not the most suitable products for corporate treasurers wishing to protect their profits from FX risk. There are more efficient alternatives like Dynamic Hedging.

Accumulator contracts can include a knock-out clause, known as the barrier, which terminates the contract if the stock price goes above a maximum level.

Accumulators are speculative operations between a seller who believes the stock price will be inferior to the strike price for the duration of the contract, allowing them to sell the stock at a more convenient price, and a buyer who believes the stock price will be somewhere between the strike and knock-out price, allowing them to buy it below the market price.