Some would find it cheaper to buy the hedge rather than do it inhouse - plus there is a lot of reciprocity in the industry. You buy your hedges from a broker who then sells your annuity. BNP just took a big write-off when they had an inadequate hedge for an index-linked note that was widely sold throughout the EU and other parts of the world. Some folks would rather pay to lay off the risk and as in the BNP experience - lay it off to a larger balance sheet. Clearly really discontinuous market can be a problem.
Many of the index-linked annuities and CDs are hedged by someone other than the issue.
With products like the Goldman one I posted, they are broadly sold throughout the e-discount broker community.
Many of the index-linked annuities and CDs are hedged by someone other than the issue.
With products like the Goldman one I posted, they are broadly sold throughout the e-discount broker community.
