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.
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.
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.
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.
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.
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.