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They've just inherently got un-hedged interest rate exposure.
by beambot 3y ago
They've just inherently got un-hedged interest rate exposure.
- makomk 3y agoYup, that is basically inherent. In order to hedge their interest rate exposure they'd have to find some counterparty that can afford to do it - there is no magic hedging or insurance fairy - which with previous interest rates would probably wipe out all their interest income and expose them to counterparty risk at the same time if they could even find anyone.
- lamontcg 3y agoYeah, AIG selling credit default swaps against CDOs comes to mind. Hedging isn't magic, someone else winds up eating all the losses.