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Why not buy a hedge? Their risk committee met 18 times. Because HoldForMaturity assets can't be hedged? Or it cuts into profit and affects your stock and manag
by gregw2 4y ago
Why not buy a hedge? Their risk committee met 18 times.
Because HoldForMaturity assets can't be hedged? Or it cuts into profit and affects your stock and management bonuses which they weren't used to giving up, and your share losses due to the hedge imperil your company but just in a different way?
- vgatherps 4y agoOh to be clear I agree with the OP that they were incompetent/greedy, I just think that missing a CRO is at best a symptom and not a cause. Every single invite to a risk committee meeting should know exactly well what sort of rates risk they had. As for the hedge, it’s probably a greed/returns question. If you buy then 10 year and sell everything between say 2 to 10 years as a curve hedge, you’ve basically bought the two year with extra steps. There’s no free lunch where you get returns of ten year without the risk on ten year. You could imagine some imperfect hedge might be better but sort of same problem.