What does the following statement mean: "after accounting for levels of market volatility, we favor receiving outright in 6-month forward-starting 2-year swaps."? Specifically, what does "receiving outright" mean? Is there a way for you to receive only the forward points? Thanks in advance!
Receiving outright simply means receiving the fixed rate versus LIBOR on the 6 month forward starting 2 year swap. The term 'outright' is unnecessary here - it is probably being used to compare with a potential strategy of receiving the fixed on a 6 month forward starting 2yr swap versus paying fixed on a spot starting 2yr swap.
I've heard this phrase thrown around in the Forex market. There is a locked-in exchange rate and delivery date in these cases.
In terms of companies, large purchases are made from foreign business that utilize outright forward contracts to cover costs. For instance, when a US company buys materials from a Mexican supplier they could be required to make a payment for half of the total value of the payment and the other half in about six months. In order to minimize currency risk exposure, a spot trade is used to cover the first payment. An outright forward is then used to lock in the exchange rate and the agreed-upon rate can be used in six months.