Interest Rate Hedging

The interest rate hedging instruments are off-balance sheet financial instruments whose value depend on, or are derived from, the value of an underlying asset, reference rate, or financial index. These instruments are to provide hedging requirements for client cash flow, asset, or liability portfolios.

Interest Rate Swap

Interest rate swaps are transactions where the asset or liability held at a variable rate of interest can be converted to a fixed rate, or vice versa.

Interest Rate Swaptions

Interest rate swaptions are options to enter into an underlying swap transaction, of which here are three types: swaptions, cancelled swap, and cash settlement basis.

Caps & Floors

Interest rate caps ensure that the borrower of a floating rate loan receives the ceiling rate if the interest rate rises above a specified level. If you are a company with a floating asset, you can use an interest rate floor to hedge against rates dropping below a certain level.

Forward Rate Agreement

A forward rate agreement is a contract between two parties to set the interest rate at some point in the future, so they can continue for an additional period of time. Principal and actual interest rates are not exchanged.