A knock-in forward is a derivative that offers buyers a more attractive rate than a regular forward and includes a condition that the exchange rate must hit a defined knock-in level during the contract. If the “Knock-in level” is not reached, the transaction will not be made on the maturity date.Due to their complex character, knock-in forwards are not the most suitable products for corporate treasurers wishing to protect their profits from FX risks. There are more efficient alternatives like Dynamic Hedging.A Knock-In Forward includes the following elements:Financial Asset: EUR/USDPosition at Maturity: EUR/USD shortAmount: 1,000,000Spot Rate: 0.9350Forward Rate: 0.9275Knock-in Forward Rate: 0.9150Knock-in Level: 0.9050Tenor: 6 monthsDespite the name ‘forward’, this mechanism is more akin to a speculative options contract*. The buyer aims to secure a more convenient rate than a regular forward but risks “losing” the contract. If the knock-in rate is not attained, the contract will be cancelled and their business will not be protected against currency volatility.