Derivative charges minimisation
Interest rate hedging optimisation
Post credit crunch banks explicitly charge for counterparty and funding costs on non-collateralised trades. Corporates need to do a cost benefit analysis in deciding if it is beneficial to collateralise or not the derivatives portfolio. Typical questions include:
- How the corporate and bank credit ratings affect CSA negotiations?
- How derivatives transacted affect the optimal threshold?
- Does it make sense to assign different trades to different banks?
- On multi-currency CSA facilities how to optimise collateral posted?
FX hedging optimisation
FX risk is a major concern for most corporates. Managing this risk entails a number of challenges such as:
- When is it optimal to use vanilla and when exotic derivatives for hedging?
- Are zero cost structures cost free?
- What role market views play in designing optimal hedging strategies?
- What is the opportunity cost of hedging?
For corporates with borrowings interest rate risk management is a major concern. Managing this risk entails a number of challenges such as:
- When hedging matters?
- What is the optimal hedge ratio and how it is related to debt duration?
- What is the role of exotic derivatives in hedging?
- When to embed and when not market views about interest rates?
Commodity hedging optimisation
Producers and consumers of commodities face major hedging challenges such as:
- Why to hedge commodity risk at all?
- When to hedge commodity risk?
- With what instruments to hedge?
- What is the optimal hedging horizon?
- When a market view exist what is the opportunity cost if we want to monetize it?