A trigger forward which represents a zero-cost structure in which the buyer enters into an outright forward foreign exchange at a handsomely above-market rate, but with the contract being allowed to knock out if a preset trigger level is breached at any time before the expiration date of the contract. Furthermore, the contract is subject to another trigger mechanism, whereby the buyer is obliged to trade the currency (by the way of sale or purchase) when that trigger is reached. Otherwise, the buyer may be able to attain additional advantage in trade. This structure can be particularly advantageous to a trader expecting a favorable limited move on the underlying rate, and at the same time ruling out the possibility that the knock-out level would be broken through any time before expiration.
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