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Insights, updates and learnings
Quantifying bank counterparty credit spread inputs for CVA
22/09/21
Quantifying bank counterparty credit spread inputs for CVA
Clients often ask what the appropriate credit spread would be when calculating CVA (Credit Value Adjustment) under the current exposure method - we outline our recommended approach for Australia, NZ and UK based organisations.
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Hedgebook’s Public API
21/11/19
Hedgebook’s Public API
An API (Application Programming Interface) is a mechanism for one system to talk to another. APIs are used as a communication channel between systems within the same organisation and/or externally between systems of one organisation and another. Either way, the use of an API is an efficient and secure way...
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15/02/17
New FX hedging instruments within Hedgebook
Traditionally, the typical Hedgebook user has focused their foreign exchange hedging activity at the vanilla end of the spectrum. Forwards, purchased options and options that are in one-for-one collar relationships have been the staple diet of importers and exporters. To be honest, even purchased options are not particularly common as...
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07/12/14
Credit spreads back to pre GFC levels
We have discussed CVA at length in our newsletter and blog as it is arguably the most significant change to the accounting standards, from a financial instruments valuation perspective, since hedge accounting was introduced. The standard relating to CVA, IFRS 13, was developed as a result of the Global Financial...
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03/08/14
Lies, damned lies and valuations
With the passing of 30 June we have entered another busy period for year-end valuations. One of the most common questions we are asked at these important balance dates is “why is there a difference between the bank valuation and the Hedgebook valuation (or any other system’s valuation for that...
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13/12/13
IFRS 13: Fair value measurement – Credit Value Adjustment
The purpose of this blog is to examine IFRS 13 as it relates to the Credit Value Adjustment (CVA) of a financial instrument. In the post GFC environment, greater focus has been given to the impact of counterparty credit risk. IFRS 13 requires the valuation of counterparty credit risk to...
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16/10/12
Where do Swaps Fit into Your Company’s Portfolio?
This is part 10 of a 10 part series on currency swaps and interest rate swaps and their role in the global economy. In part 9, we discussed regulation affecting swaps. In part 10, we’ll review the effectiveness of swaps and whether or not they should be used part of a hedging strategy.
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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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08/10/12
Understanding Central Bank Liquidity Swaps
This is part 7 of a 10 part series on currency swaps and interest rate swaps and their role in the global economy. In part 7, we illustrated how companies use swaps in the global market place, but on a company-to-company basis. In part 8, we’ll explain the purpose of swaps on the central bank level and when they’re used.
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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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20/08/12
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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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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27/06/12
Judicious use of FX orders to get hedging in place
Once a company with foreign exchange risks has decided to lift or reduce hedging percentages as part of their risk management strategy, value-enhancing market dealing tactics to get the hedging entered at more favourable exchange rates will add to the overall hedging performance. I have always been a strong advocate...
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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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