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The Hedgebook collection

Insights, updates and learnings
05/03/13
Hedging, and a deeper look into the types of Financial Hedges
Financial hedging involves buying and selling foreign exchange instruments that are dealt by banks and foreign exchange brokers. There are three common types of instruments used: forward contracts, currency options, and currency swaps.
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16/01/13
Hedging Basics: Currency Swaps
A currency swap locks in a price of a currency pair and is another tool that can be used to manage an organisation's cash flow. It pays the fixed-price buyer of a currency pair a payout equal to the difference between the current price and the settlement price of the swap.
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The Future of Interest Rate Swaps: Will Regulation Kill this Investment Vehicle?
12/10/12
The Future of Interest Rate Swaps: Will Regulation Kill this Investment Vehicle?
This is part 9 of a 10 part series on currency swaps and interest rate swaps and their role in the global economy. In part 8, we discussed the role of interest rate swaps in the demise of Greece. Given the importance of swaps in the U.S. housing crash, new regulation has arisen that could threaten the future of this important financial derivative.
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05/10/12
Real World Example: Swaps Between Companies
In part 6 of a 10 part series on currency swaps and interest rate swaps and their role in the global economy we provide a real world example of how swaps are constructed and executed.
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03/10/12
Swaps: A basic Q and A
This is part 5 of a 10 part series on currency swaps and interest rate swaps and their role in the global economy. In parts 1 through 4, we discussed the differences between interest rate swaps and currency swaps, as well as the pricing mechanisms for fixed-for-floating, floating-for-floating, and fixed-for-fixed swaps. In part 5, we’ll review the basics before looking at some real world examples in parts 6 and 7.
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02/10/12
Floating-for-Floating and Fixed-for-Fixed Swaps: Domestic and Foreign Currency Transactions
This blog on floating-for-floating and fixed-for-fixed swaps is part 4 of a 10 part series on currency swaps and interest rate swaps and their role in the global economy.
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23/09/12
Fixed-for-Floating Swaps: Domestic and Foreign Currency Transactions
This is part 3 of a 10 part series on currency swaps and interest rate swaps and their role in the global economy. In parts 1 and 2, we discussed the beginnings of swaps as well as the differences between interest rate swaps and currency swaps. In part 3, we’ll discuss fixed-for-floating swaps.
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20/09/12
The differences between Currency Swaps and Interest Rate Swaps
This is part 2 of a 10 part series on currency swaps and interest rate swaps and their role in the global economy. In part 1, we discussed the beginnings of swaps. In part 2, we’ll explore the differences between the two major types of swaps and their different uses for financial institutions.
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Why Are Interest Rate Swaps Important?: A Brief History
12/09/12
Why Are Interest Rate Swaps Important?: A Brief History
In this blog we discuss the history of interest rate swaps so as to better understand the vital importance of this investment vehicle.
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29/08/12
Just what is an interest rate swap?
One of our team was recently asked to give a simple overview of interest rate swaps and how they work. Below was the explanation we put together, using a comparison between an interest rate swap to a fixed-rate bank loan to illustrate the key characteristics. We think it is a nice, concise and clear way to explain interest rate swaps so thought we would share it. Comments welcome.
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20/08/12
Interest Rate Swap Tutorial, Part 3 of 5, Floating Legs
Introducing floating legs For our example interest rate swap we will be using the following inputs: Notional: $1,000,000 USD Coupon Frequency: Semi-Annual Fixed Coupon Amount: 1.24% Floating Coupon Index: 6 month USD LIBOR Business Day Convention: Modified Following Fixed Coupon Daycount: 30/360 Floating Coupon Daycount: Actual/360 Effective Date: Nov 14,...
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20/08/12
The GFC, Corporate Governance and Hedgebook…
In the wake of the Global Financial Crisis (GFC), Corporate Governance has become a key focus, not just for large organisations but for small to medium sized entities as well. Corporate Governance relates to the rules around how a company is controlled, whether it is by processes, policies, laws or...
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13/08/12
Interest Rate Swap Tutorial, Part 2 of 5, Fixed Legs
Now that we know the basic terminology and structure of a vanilla interest rate swap we can now look at constructing our fixed leg of our swap by first building our date schedule, then calculating the fixed coupon amounts.
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12/07/12
Interest Rate Swap Tutorial, Part 1 of 5
This is the first in our interest rate swap tutorial; a series of articles that will go from the basics about interest rate swaps, to how to value them and how to build a zero curve. Introduction: Interest Rate Swap Tutorial An interest rate swap is where one entity exchanges...
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16/01/12
Interest Rate Swap Tutorial, Part 5 of 5, building your swap curve
Swap Curve In the final article in this series, we will continue to build out our discount factor curve using longer dated par swap rates. Par Swap rates are quoted rates that reflect the fixed coupon for a swap that would have a zero value at inception. Let look at our zero...
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20/12/11
Interest Rate Swap Tutorial, Part 4 of 5, Swap Curve Construction
Swap curve construction In the previous articles we described basic swap terminology, created coupon schedules and calculated fixed and floating coupon amounts. We also present valued our cashflows and calculated forward rates from our Zero Curve. A zero curve is a series of discount factors which represent the value today of one...
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