Interest Rate Risk Management
As global borrowing costs surge as central banks take measures to combat inflation, the spotlight on cost-management strategies intensifies, particularly concerning long-term loans. Within this context, Foreign Currency Funding emerges as a favoured method for trimming borrowing expenses by bringing in Interest cost reduction. There are many challenges that corporates encounter. QuantArt has unparalleled expertise in advising on potential strategies and identifying correct measures to curtail borrowing costs, with a keen emphasis on long-term loans. While evaluating on how to bring about Interest cost reductions, we look at many perspectives. To name a few- we get involved in the judicious selection of currencies, the implementation of hedging methods, risk management through floating interest rates, and adherence to regulatory guidelines. We look at the advantages of Interest Rate Swaps (IRS) and curve inversion, offering a thorough breakdown of costs associated with Fx Option hedges and IRR in both USD and INR.
We have established a strong trust with our clients. We believe in long standing associations. Client from our starting years continue to work with us. When you choose an advisor, you should always choose the best.
Interest Rates Services
We will be evaluating your working capital and term loan portfolio. On the working capital, we will advise you when to go for PCFC, PCRE, EPC, FCTL, CC, CP, etc, and what rate you should get. On the term loan side, we will advise you on ECB, FCTL, RTL, and how you can manage Foreign currency risk or fixed floating risk so that overall you achieve cost savings.
We support the evaluation of various hedge strategies like swaps, option-based hedging, short-term hedging with rollover, tranche hedging, partial amount hedging, etc. Within swaps also there are multiple variants and IRR calculation for each of the choices will be evaluated. Within option structures, we will be evaluating plain calls, out-of-the-money calls, spreads, staggered call spreads, etc. Optimum hedge structure reduces interest cost.
We will be involved in the pricing of strategies and the computation of IRR under various scenarios. There is a deep understanding of credit charges and bank models which helps in the reduction of cost.
Interest Rates Services
We will set up the system for Negotiation of the pricing, strategy for getting effective pricing, and support in negotiations if required. This will be an extremely important aspect as the possibility of leakages can be significant. Often banks charge the high prices on deal execution and considering we have worked in senior management positions in both Indian and Foreign banks we understand the psychology and the tricks of the trade. We help the companies in appropriate strategizing to get the right rate while dealing with the banks.
Using options help at times. However, option-based hedging should not be done without deep understanding. We educate and handhold companies in understanding vols surface, Greeks like delta, gamma and how to use the Greeks for decision making and monitoring.
We bring structured financing ideas and execution to corporates. Structuring involves tweaking of securities, the composition of loans, fixed-floating switching, international borrowing, etc.
How we help our Commodity Clients
How we help our Commodity Clients
Our aim is to offer a stable and cost-efficient environment for our clients, enabling them to concentrate on their core business areas. We are committed to overseeing all facets of risk management and hedging on behalf of our clients.
Our intent was to instill transparency in operations, establish quantitative accountability in result assessments, implement strategic excellence based on proprietary algorithms, and exhibit proactive responses to market movements. The ultimate goal was to ensure client profitability regardless of the direction of market fluctuations.
We have an outstanding track record of attaining measurable results aligned with the specific objectives we set in collaboration with our clients. This achievement is made possible by our meticulous selection of highly skilled experts in Treasury/FX risk management. What sets us apart is our distinctive approach—our advisory services are directly provided by senior advisors and directors without any delegation. Each client’s portfolio receives dedicated attention from one of the three members of our leadership team. They conduct thorough reviews every morning and evening, strategizing on the optimal course of action. QuantArt aligns closely with each client’s vision, establishing quantifiable and measurable objectives for a mutually successful partnership.
Exclusive Reports
We release well researched reports on Global markets-Outlook and Strategies, Global currencies, Commodities, Risk management and Hedging strategies, Hedging instruments and Best practices. Log on to QuantArt Hedgenius to access our full Exclusive Reports.
On one hand, the UK faces recessionary pressures, with its economy contracting 0.3% in Q4 2023, worse than expected. On the other hand, despite this, the annual inflation rate remains steady at 4% in January 2024. High and persistent inflation complicates rate-cutting efforts to stimulate the economy. The GBP is ready for a sharp move. The question is, are you hedged appropriately? Are you poised to benefit from likely movements? What’s your risk management strategy?
The February 2024 Zinc Outlook Report suggests a complex market ahead. It predicts a near-term dip in China’s zinc output due to increased costs and environmental concerns, potentially supporting prices. Conversely, China’s stimulus measures hint at a demand recovery, influencing market surplus projections. Moreover, disruptions in global smelting operations could exert upward pressure on prices, despite a temporary bearish outlook due to the Chinese New Year and economic slowdown.
The “USDINR Outlook and Strategy” report of February 2024 dissects the intricate interplay between rate expectations and currency performance. It offers a deep dive into the hedging strategies essential for navigating the currency markets. The analysis details the impact of US monetary policy on the Indian Rupee and outlines potential paths for USDINR, considering various global and domestic economic scenarios.
The February 2024 Chinese Yuan Outlook indicates a poised economy with a 4.9% growth in Q3 2023, defying forecasts amidst a property slump. The People’s Bank of China holds the loan prime rate at 3.45%, fostering economic stability. However, the property crisis and trade headwinds persist, with expectations of a continued cautious monetary policy.
The “USDBRL Outlook and Hedge Strategy” report outlines the Brazilian economic scenario, highlighting the Central Bank’s rate cuts in response to slowing inflation and the economy’s modest growth. Despite challenges like fiscal concerns and high interest costs, there are positive signs such as a tight labor market and real wage gains. The report forecasts a short-term USDBRL movement towards 5-5.2, with a medium to long-term uptick expected. It advises importers and exporters on hedging strategies to navigate market volatility effectively.
The “Lead Outlook Report” for February 2024 forecasts a temporary dip in Chinese lead production due to smelter maintenance, impacting global supply. Concurrently, demand is expected to rise, driven by increased battery production in Europe, China, and the US, alongside overall global demand growth. However, the report suggests a balanced market due to a slower rise in global supply, with lead prices anticipated to stabilize in the short term and potentially increase in the medium term, influenced by expanding lead-acid battery production and potential dollar weakening.
We can work with your team to enhance their skills
Training and Capacity Building
Here’s what we will cover during the session-
- The appropriate currency for borrowing
- Optimizing with the Right Hedging strategy and instruments
- Efficiently managing floating interest rate risk
- Meeting regulatory and stakeholder requirements
Here’s what we will cover during the session-
- Interest Rate Outlook.
- Interest Cost Reduction Strategies.
- Hedging of Interest Rates
- Selection of Right Tenor.
Here’s what we will cover during the session-
- Swaps – Concept of FRA, interest rate and currency swaps.
- SOFR and RFR dynamics – O/N and Term SOFRs
- Interest rate curves – SOFR, EURIBOR and other RFR curves,
- Concepts of FRA and IRS
- Swap conventions – day count, frequency, stub etc.
- CCS, POS, COS
- Basics of swap pricing – Yields and zeros, Bootstrapping, Discount factors and swap pricing
- Swap pricing in excel
- Cross currency basis and pricing cross currency swaps
- LTFX pricing and equivalence to swaps
- Evaluation of strategies – IRR calculations
