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Similarly, an interest rate floor is a derivative contract in which the buyer receives payments at the end of each period in which the interest rate is below the agreed strike price. Caps and floors can be used to hedge against interest rate fluctuations. For example, a borrower who is paying the LIBOR rate on a loan can protect himself against ...
In mainstream economics, monetary policy (i.e., Central Bank adjustment of interest rates and its balance sheet) is the primary mechanism, assuming there is some interest rate low enough to achieve full employment. Kelton said that "cutting interest rates is ineffective in a slump" because businesses, expecting weak profits and few customers ...
Its concern is thus the interrelation of financial variables, such as share prices, interest rates and exchange rates, as opposed to those concerning the real economy. It has two main areas of focus: [2] asset pricing and corporate finance; the first being the perspective of providers of capital, i.e. investors, and the second of users of capital.
A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment. A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, gambles, [1] many types of over-the-counter and derivative products, and futures contracts.
Krugman's book is mostly a macroeconomic guidebook that advocates for regulatory reform of the financial system, including the reduction of interest rates and increasing budget deficits to counter recessions. That includes regulation of hedge funds and auction rate security systems. [2]
The forward exchange rate depends on three known variables: the spot exchange rate, the domestic interest rate, and the foreign interest rate. This effectively means that the forward rate is the price of a forward contract, which derives its value from the pricing of spot contracts and the addition of information on available interest rates. [4]
Fixed-Income Relative-Value Investing (FI-RV) is a hedge fund investment strategy made popular by the failed hedge fund Long-Term Capital Management.FI-RV Investors most commonly exploit interest-rate anomalies in the large, liquid markets of North America, Europe and the Pacific Rim.
Valuation in a World of CVA, DVA, and FVA: A Tutorial on Debt Securities and Interest Rate Derivatives. World Scientific. ISBN 978-9813222748. Alexander Sokol (2014). Long-Term Portfolio Simulation: For XVA, Limits, Liquidity and Regulatory Capital. Risk Books. ISBN 978-1782720959. Osamu Tsuchiya (2019). A Practical Approach to XVA. World ...