Хеджиране на лихвения риск като важна стратегия при реализирането на успешни инвестиционни проекти
Interest Rate Risk Hedging as an Important Strategy in the Implementation of Successful Investment Projects

Author(s): Kalina Yankova
Subject(s): Economy, Business Economy / Management, Micro-Economics, Financial Markets
Published by: Университет за национално и световно стопанство (УНСС)
Keywords: hedging; interest rate risk; investment projects
Summary/Abstract: A large group of financial derivatives is developing in response to the high volatility of interbank interest rates, which has a direct impact on all economies in the world. Apart from speculation, interest rate derivatives are used to partially or completely neutralize the movement of interest rates on long-term investment loans. Interest rate risk management tools are still rarely used by Bulgarian companies due to their poor knowledge, despite the relative simplicity of their nature and seamless access to them. The present study aims to make a comparative analysis of the most commonly used hedging instruments and strategies, namely interest rate options and interest rate swaps. Both instruments are illustrated with concrete examples, the calculations being made using the Bloomberg platform, which is mainly used in the interbank market when concluding interest rate derivative transactions. To illustrate the effectiveness of building interest rate protection, the same investment loan was hedged with an interest rate swap (full protection), as well as by building different protection strategies with interest rate options (full and partial protection). The examples will also be used to compare the costs that the investor has to incur for the purchase of different financial instruments depending on the washed strategy, including the requirements for initial and maintenance margin. The results of the study show that the use of interest rate derivatives is both easy and affordable in Bulgaria. Specific examples provide clarity on the steps and conditions for purchasing these financial instruments.

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