Transforming Debt: Interest Rate Swaps Offer Risk-Free Hedging Solutions
Interest rate swaps are a type of financial tool that can help manage interest rate risks. They involve exchanging fixed interest rate payments for floating rate payments. This can be useful for converting variable rate debt into fixed rate debt. The risks and rewards in interest rate swaps are balanced, similar to equity futures. These swaps can be used as hedging instruments, with cash flow hedge accounting applicable in certain cases.