HOLY SH*T! Swap Spreads Just...
Eurodollar University
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Negative Swap Spreads and Risk Management
This chapter explores the concept of negative swap spreads and their implications for risk management. It discusses why anyone would accept a lower return on an interest rate swap compared to a US treasury, and how large financial players use interest rate swaps to hedge against risk. The chapter also highlights the constraints faced by dealers and the increased demand for interest rate swaps by pension funds to hedge against negative risks.
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