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Negative interest rates and embedded floors

In September 2016, we published the article ‘How Negative interest-rates will affect treasury’. We now delve into one of the problems mentioned concerning hedge effectiveness calculations.

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On swap valuation and overnight rates

In the past, deriving the market value of an interest rate swap was considered fairly easy. Nowadays, things have changed. Things which once seemed stable are now unstable and a risk-free rate is no longer without risk. For this reason, the valuation of any type of swap has to change. This article aims to throw some light on the major developments in the interest-rate derivatives markets, the emergence of a new methodology, and the underlying complexities in valuing diff erent kinds of swaps.

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Hedging the unhedgeable longevity risk

Unexpected increases in longevity

Considering the illiquid nature of these swaps, along with the imbalance between the buyers and the sellers, these are still early days for this market

Unexpected increases in longevity raise the costs for life insurance companies. Longevity risk occurs when people living longer than expected.

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How to value a cross-currency swap

Since the first transaction in 1981 between the World Bank and IBM, the market of cross-currency swaps has grown rapidly. It represents, according to the Bank of International Settlements, an outstanding notional amount of USD 16,347 billion as per June 2010. In this article we will discuss how cross-currency swaps work, and how to value them.

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Benefit from inflation

with bonds, swaps, caps and floors

The problem of inflation is nearly as old as currency itself, and inflation-linked products have been around for centuries as well. In this article, consultant Rogier Galesloot discusses the history of inflation-linked products and shows how inflation-linked bonds, swaps, and caps/floors can be of interest to an organization or institution looking to hedge against inflation. 

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