Interest rate swap

Martinghoul · Apr 23, 2009, 3:18am

There are no options on gilts... The caplet route sounds good. Otherwise, you're gonna have to live with doing short sterling and just running the LIBOR/base risk (that's not such a bad position to run, as you would be the right way on it).

eliotsagor · Apr 23, 2009, 4:13am

You could short gilt futures??

MrGecko · Apr 23, 2009, 4:28am

Euronext - Product information > Contract specifications

??

Martinghoul · Apr 23, 2009, 4:53am

Yes, MrG, LIFFE would like you to believe there's gilt options. However, if you look, open interest on them is and had always been 0. For all effects and purposes, they might as well not exist.

As to using gilts to hedge the base rate, there's all sorts of extra risks you're getting yourself into (asset swap being the biggest one). It's possible, but I would stick to LIBOR/base, personally, as I perceive it as a less dangerous and less complicated position.

jm99 · Apr 23, 2009, 7:26am

[QUOTE=eliotsagor;737908]

So I take it you are worried about hyperinflation and high rates??[QUOTE]

aye

MrGecko · Apr 23, 2009, 7:35am

Quote:

Originally Posted by Martinghoul

Yes, MrG, LIFFE would like you to believe there's gilt options. However, if you look, open interest on them is and had always been 0. For all effects and purposes, they might as well not exist.

As to using gilts to hedge the base rate, there's all sorts of extra risks you're getting yourself into (asset swap being the biggest one). It's possible, but I would stick to LIBOR/base, personally, as I perceive it as a less dangerous and less complicated position.

Sure, I had a sneaky peak at the OI just after I posted the link... you would have thought there would be a market in these things, wouldn't you..??

Martinghoul · Apr 23, 2009, 9:13am

Quote:

Originally Posted by MrGecko

Sure, I had a sneaky peak at the OI just after I posted the link... you would have thought there would be a market in these things, wouldn't you..??

Shall we do some mkt making in gilt options, MrG? In seriousness, not sure why there's not one for the gilt. It may be that the mkt is not good/deep enough to be able to hedge properly.

gooseman · Apr 23, 2009, 9:35am

been tried a thousand times. not enough liquidity in options for market makers or end users.

Apr 23, 2009, 3:18am	#17
Martinghoul Legendary Member Member Since Feb 2009 2,456 Posts	Re: Interest rate swap There are no options on gilts... The caplet route sounds good. Otherwise, you're gonna have to live with doing short sterling and just running the LIBOR/base risk (that's not such a bad position to run, as you would be the right way on it). __________________ "Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness."

Apr 23, 2009, 4:13am	#18
eliotsagor Rookie Member Since Aug 2008 5 Posts	Re: Interest rate swap You could short gilt futures??

Apr 23, 2009, 4:28am	#19
MrGecko Banned Member Since Nov 2007 2,822 Posts	Re: Interest rate swap Euronext - Product information > Contract specifications ??

Apr 23, 2009, 4:53am	#20
Martinghoul Legendary Member Member Since Feb 2009 2,456 Posts	Re: Interest rate swap Yes, MrG, LIFFE would like you to believe there's gilt options. However, if you look, open interest on them is and had always been 0. For all effects and purposes, they might as well not exist. As to using gilts to hedge the base rate, there's all sorts of extra risks you're getting yourself into (asset swap being the biggest one). It's possible, but I would stick to LIBOR/base, personally, as I perceive it as a less dangerous and less complicated position. __________________ "Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness."

Apr 23, 2009, 7:26am	#21
jm99 Senior Member Member Since Dec 2004 205 Posts	Re: Interest rate swap [QUOTE=eliotsagor;737908] So I take it you are worried about hyperinflation and high rates??[QUOTE] aye

Apr 23, 2009, 9:35am	#24
gooseman Legendary Member Member Since Feb 2008 1,809 Posts	Re: Interest rate swap been tried a thousand times. not enough liquidity in options for market makers or end users.

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