While this minor disparity in the effective fixed rate, ex post, relative to its ex ante anticipated fixed rate would likely justify the assessment that the hedge will perform quit...

Publication:  AFP Exchange

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Many companies with variable-rate funding look to derivatives to transform their variable interest-rate exposures to synthetic fixed-rate debt....

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 configuration of forward interest rates tha...

Assuming the availability of derivative instruments relating to the goods under consideration, most hedgers (or potential hedgers) realize that a number of hedging vehicles could b...

The first pitfall to avoid is using a standard pay-fixed/receive-floating interest rate swap in conjunction with this loan. This plain-vanilla swap design fails on its face because...

This 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 opportunity cost. Effectively the swap ser...

Cross-hedges may be used in financial markets. As is well known, interest rate swaps are the most common tool corporate treasurers use to convert variable rate funding to fixed, or...

July 7, 2009

Caps do work as advertised, with some qualifications. In a perfect application, the cap buyer would seek a structure corresponding with the terms of the variable rate exposure. For...

The issue gets a little more complicated when interest swaps are introduced into the equation. Interest rate swaps can be used to convert variable rate funding synthetically to fix...

Despite the lack of certainty, it would seem that both alternatives of leaving the swap in place or liquidating the swap suffer from the same shortcoming. That is, in either case,...

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