Firms using swaps to hedge debt risks, impacting financial stability.
The study looked at how companies manage their debts and use interest rate swaps to protect themselves from changes in interest rates. By analyzing data from thousands of non-financial firms, the researchers found that companies use swaps to hedge against interest rate risks from their debts, but not from their regular business activities. Companies that don't use swaps end up taking on less short-term debt to avoid the risks.