Hedging with Off-Market SwapsWhile this minor disparity in the effective fixed rate, ex post, relative to its ex ante anticipated fixed rate would likely justify the ass
Saving Money When Banks Offer ‘Chooser Options’Publication: AFP Exchange PDF Version Many companies with variable-rate funding look to derivatives to transform their variable...
Comparing Apples and Oranges (and Pears)Values for all of these three contract prices are dependent on the yield curve as of the date of the valuation, or more directly, on the con
Taking Stock – Hedging Inventories, Hedging SalesAssuming the availability of derivative instruments relating to the goods under consideration, most hedgers (or potential hedgers) realize t
This Year’s Model – New Lending Practices and Related Accounting ConcernsThe first pitfall to avoid is using a standard pay-fixed/receive-floating interest rate swap in conjunction with this loan. This plain-vanil
Switching Caps For SwapsThis lack of an initial payment does not exactly mean that the swap is free. It is not. Economists consider the cost of the swap to be an op
Cross hedging – X Marks the SpotCross-hedges may be used in financial markets. As is well known, interest rate swaps are the most common tool corporate treasurers use to co
Assessing Interest Rate CapsCaps do work as advertised, with some qualifications. In a perfect application, the cap buyer would seek a structure corresponding with the
Free MoneyThe issue gets a little more complicated when interest swaps are introduced into the equation. Interest rate swaps can be used to convert va
Disciplined Hedging – Controlling Interest Rate Risk in an Uncertain WorldDespite the lack of certainty, it would seem that both alternatives of leaving the swap in place or liquidating the swap suffer from the sam