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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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How do you value a credit default swap?

Warren Buffet once called these products 'weapons of mass destruction', how do credit default swaps work?

Multi-billionaire Warren Buffet once called these products 'weapons of mass destruction', because he thought they were partly responsible for causing the credit crunch. Despite this remark, there is still a buoyant trade in credit default swaps. Here we discuss how they work, and how they are valued.

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Mortage interest

Abolition of tax relief on mortgage interest: a risk or an opportunity?

A discussion has been raging for years in the Netherlands about making cuts in tax relief on mortgage interest, but so far moves to alter the system have come to nothing. But this look set to change. The tax relief on mortgage interest was an item in every political party manifesto for the general election in June 2010 and everybody is talking about it.

A poll conducted by Maurice de Hond actually showed that a majority of the population favors altering the present scheme. The next step might be its complete abolition. Consultant Martijn de Groot explains how this could affect the risks of mortgage portfolios.

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Value for valuation

The importance of determining the value of liabilities is increasing

When the financial world talks about market value, it usually concerns the asset side of the balance sheet. Asset managers are constantly determining the value of shares and bonds.

In turn, banks specialize in determining the value of loans and mortgages. But the market valuation of liabilities continues to receive little attention. This is about to change, however, because of the growing importance of accurately determining the current and future values of companies (which is, after all, the difference between their assets and their liabilities).

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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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