Solution 3-AUD/EUR Knock-In Forward-Buy an AUD Put/EUR Call and Sell an AUD Call/EUR Put with Up-and-In Trigger-Zero Premium Expiry Date: 2015-01-14 (four months) Value Date: 2015-01-16 B Put Strike: 0.6890 (20 pips below the FEC) S Call Strike: 0.6890 with up-and-in knock-in trigger at 0.7140 With this structure, your worst-case rate is 0.6890 (20 pips below the FEC). When the option starts, you only have a bought AUD put option with a strike of 0.6890. However, if 0.7140 trades at any time between the option start and expiry date, then you are "knocked in" to a sold AUD call option with a strike of 0.6890. Having a bought AUD put and sold AUD call option with the same strike creates a synthetic forward. So, in layman's terms, this structure gives you a worst-case rate that is 20 pips worse than the FEC; however, you have the opportunity to participate in the AUD/EUR all the way to the trigger rate of 0.7140. If 0.7140 does trade during the life of the option, then you have to deal at the common strike rate of 0.6890