Search results

I'm not sure you under how this all works. The bank can go swap at around 5% year for floating payments. So, it may seem to you that the bank is locked into earning 5%, but that isn't the case. They could (and usually would have) swapped that out. (And this is not even getting into the...

Okay. I just did. Did I misread you? You said: "whereas volatility-weighted would be an adjustment to compensate for the lack of correlation." I just showed that mathematically that volatility weighted is only the solution when correlation is 100%... so it's not the lack of correlation.

Not True. For two stocks A and B Hedging Ratio = Beta(A,B) = Cov(A,B)/Var(B) Correlation = Cov(A,B)/Std(A)Std(B) If Correlation = 1, then Cov(A,B) = Std(A)Std(B) Then, substitute this back into the hedging ratio calculation, you get Beta(A,B) = Std(A)Std(B)/Var(B) =...

Both are guess works; It's impossible for one to always work better than the other. It all depends on the correlation between the pair.

Why absurd? Given the 30-year swap rate is 4.48% right now, a 40-year fixed at 5% is really no different from 30-years worth of 3M reset floating loans.... it's only absurd if you don't under how the fixed income market works.

Good point regarding the Cap structure. It's simple, straightfoward, involves no counterparty risk (from the seller's perspective, anyway) and relatively easy to understand. Wonder why it isn't done more.

Volatility weighting implicitly assumes a correlation of 100%. Do so at your own risk.

It's done institutionally all the time for mortgage investors; Hedging mortgage is one of those Fixed Income 102 kind of problem. It's been worked on since the 80's when these things were first securitized. Providing a hedging service for retail customers would be a lot like selling them an...

Why do you always do this? Leave a thread you started only to return a few weeks later to post some fairly pointless reply? You've done this in at least several threads that you've started. Is it because you *have* to get your last word in? I'm curious.

I'm confused... is your business focus day trading or getting other traders to... do something for you?

Improve in what sense? get different traders??

If you are a sole trader and not using margin, what do you benefit from limited liability? What kind of liability can you incur? Moreover, if you are the sole member of your company - don't you run the risk of your corporate veil being pierced anyway unless you are extremely careful with your...

WTF? Employment is a lagging indicator of recovery; You wouldn't expect to see it until early expansion.

Was that your goal? I thought your posts were all conspiracy theories based purely on your own ignorance of the market (or reality, for that matter)

And there are plenty of ones that do not. Those are the ones you've never hear about. (ie, insurance wrappers, [random shit x]-to-[strange crap y] swaps, CDX swaptions... the list is long)

No. That's not why. The development of CDS is related to the development of interest rate swaps which came in the late 80s, 90s (same concept of ISDA is used as the contract document for both). It was developed for institutional users as opposed to retail. Thus, it fell outside of the usual...

Ironic... given the subject; In the interest of fairness, what was the title originally?

Because you are indeed a dim witted idiot given your long and pathetic history of posts. Judging by your comments, you are either horribly ignorant, or a willful troll. A tiny ounce of thinking will resolve a question like "Even if he invested into something like T-Bonds that paid out about...

Yeah... rolling is going to be a bitch; You could... I suppose... use an ETF on treasuries; the only problem is that you'll have to figure out the duration of the ETF (although you should know the general band depending on whether it's short, intermediate, or long - there's probably a bit of...

Even if you don't have access to PRIME, it's not a big deal; just use treasury futures since PRIME is basically Treasury + some spread that doesn't change all that often. The cheapest way to do it: You'll need to calculate the effective duration of your two loans, add them up, and then hedge...