Hedging Strategies
Strategic guides and analysis on interest rate hedging approaches including caps, swaps, collars, and other instruments for commercial real estate portfolios.
Capped Corridors
Borrowers comparing term sheets often come across two options with similar terms – a balance sheet fixed rate and bank floater with a swap.
Costless Protection With an Open Window
What an amazing report! Huge upside jobs gained and unemployment back down to 4.3%.
Upcoming Rate Lock? Hope is Not a Hedge...But a Swaption Is
Swaps have some benefits that are often overlooked.
What Strike to Buy
The age-old question!
Hybrid Hedging Strategies - Something to Consider
Balancing risk and protection off today's rate expectations.
Hedging Falling Rates
Falling rates is generally good news for CRE borrowers, but have you considered where you might be exposed as the Fed begins cutting rates?
Swaptions for Construction Loans
Part 5 of our resources for hedging construction loans is here! Learn how to mitigate interest rate risk with a swaption.
Swaps for Construction Loans
Part 4 of our resources for hedging construction loans is here! Learn how to mitigate interest rate risk with a swap.
Corridors for Construction Loans
Part 3 of our resources for hedging construction loans is here! Learn how to mitigate interest rate risk with a corridor.
Collars for Construction Loans
Part 2 of our resources for hedging construction loans is here! Learn how to mitigate interest rate risk with a collar.
Caps for Construction Loans
Have a construction loan? Learn about ways to mitigate interest rate risk with a rate cap!
Negative Defeasance - Use it or Lose it
Waiting until the loan is in the Open Period to prepay might mean losing out on the benefit of a negative defeasance penalty.
Rate Lock Remorse
Eliminate loan spread risk and benefit if rates fall
Borrowers Could Float Lower, But You Don't Have To
If history tells us anything, it’s that markets tend to underestimate how far floating rates will fall once the Fed starts cutting.
Buy Out Your Floor Before the Fed Cuts
...or buy it if you've already closed.
Are Collars the Solution?
The idea of a collar as a hedging tool often comes up when caps become expense. Get a cap with no out of pocket today - what’s not to love?
Replacement Hedge Strategies - Part Two
Part two of this resource focuses on borrowers with bank debt where the bank has the ability to offer swaps and other derivatives.
Replacement Hedge Strategies - Part One
Many borrowers with upcoming hedge maturities wonder if there are alternatives to a vanilla cap that they should consider.
Cut Cap Escrows in Half
Borrowers who extend their interest rate caps early, or purchase extensions longer than the minimum term, can cut their monthly escrows in half.
Buying Down the Swap Rate
Locking in a swap and buying down the rate to something below market is one way borrowers can hedge debt more efficiently.
Mitigating Prepayment Penalties
In most cases, the moment a fixed rate loan is closed there’s a considerable prepayment penalty.
Buying a Cap Below the Floor? Learn About the Flooridor
Looking to lower your rate? Some commercial real estate borrowers have done this by purchasing an interest rate cap strike below where floating rates are going.
Negotiate Your Interest Rate Floor Before the Fed Cuts
Floating rates have risen rapidly bringing loan floors higher with them; negotiating floors out of the commercial real estate loan has become critical.
Hedging Your Fixed Rate Financing With The Swaption Corridor
In commercial real estate, you could reduce the cost to hedge your upcoming fixed rate financing by blending two instruments creating a “swaption corridor."
The Capped Corridor - An Alternative to the Vanilla Interest Rate Cap
Looking to calculate the effective rate for commercial real estate when SOFR is above the sold strike? We walk you through examples to better explain SOFR.
Defeasance Without The Premium?
Defeasance is a process where the real estate securing a piece of debt is swapped out for a portfolio of securities, typically US Treasury or Agencys.
Cashflow Constrained? Step Up the Swap
Swap rates can be stepped just like cap strikes.
Market Volatility & What To Do With a Worthless Cap
A primary driver of increases in cap costs has been the sharp climb in market volatility, especially in commercial real estate.
Hedging Prime
Unlike LIBOR, there are no Prime futures. Many banks won’t provide hedges based on Prime. Traders usually charge premiums for the risk between LIBOR & Prime
Synthetic Fixed Rate
Synthetic Fixed Rate
Corridors For Dummies
Corridors are frequently confused with their more common cousin, collars. Unlike collars (cap & floor), corridors are just two caps – one bought and one sold.
What Is An LEI (Legal Entity Identifier)?
The Legal Entity Identifier, or LEI, is a twenty-character code that acts as an identifier for entities participating in derivatives transactions.