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How to manage Interest rate risk hedging and reduce interest rate hedging cost by using Interest rate swaps. 

Interest rate swaps are used for hedging and managing interest rate risk. The Interest rate swaps can be either floating to fixed, fixed to floating or a basis swap. 

Most commonly used interest rate swaps in the global markets is a USDIRS which is a swap against Libor. The IRS or interest rate market is fairly liquid.

While the IRS levels are displayed in screen for standard tenor, often the loan will have an amortisation profile or interest rate dates which will not match with standard curve

Hence the fine swap pricing involves adjustment through
  • Zero rates
  • Appropriate interpolation
  • Adjustment of Libor basis
  • Ensuring fairness in dealing by avoiding mark up
  • Appropriate credit charge adjustment. 
Sometimes a fixed to floating interest rate swap is used to take advantage of the softening interest rate environment or to ensure asset liability duration mismatch.
 
We help companies in calculating exact inter bank swap rates for interest rate risk hedging by taking care of all the finer adjustments and also help them with other supports like
  • Scenario analysis
  • Evaluation of caps, floors, collars and FRAs
  • Timing of the IRS
  • Execution of the IRS
  • Outlook on Libor and how that compares with FRAs
  • ISDA documentation etc. 

 

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