Rate accompli: Are rising interest rates bad for all assets?
Many Happy Returns
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Interest Rate Swaps - What Makes a Market?
A lot of these derivatives have to be margined so you have to put up some collateral. Anybody who's got a receiver swap will lose lots of money if rates increase hugely. So that's why swap rates are used to set your two year fix and your five year fix because that's how the banks hedged the risk. All of this stuff is going to be set based on the yield curve. That's the kind of ground rock on which all risk is built.
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