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Interest rate risk with only swaps
Posted: July 9th, 2012, 5:44 am
by krishnan
I saw this stream of questions quite interesting. I was wondering if someone can help in suggesting some solutions. I was wondering how someone can hedge interest rate risk in the short end portfolio with only swaps? I would like to come out with a solution from operational perspective to hedge IRR( interest rate risk ) against non parallel shift of yield curve. I would indeed appreciate any suggestions.Cheers,Elan
Interest rate risk with only swaps
Posted: July 11th, 2012, 8:09 am
by chilun
How about OIS swap?Suppose you have a short tenor deposit / loan. The OIS swap can convert your interest rate risk exposure to overnight which is very small?
Interest rate risk with only swaps
Posted: July 18th, 2012, 11:41 am
by krishnan
Thanks indeed, but what about the spreads between the OIS and the swap curve( eonia 1m, 6m)? will this not cause me liquidity risk?
Interest rate risk with only swaps
Posted: July 18th, 2012, 11:47 am
by Martinghoul
There is no such thing as an EONIA 1m or 6m swap curve (not at the moment, anyways). You're very confused, krishnan.