Re: Ask me about working with derivatives for \'retail\' clients
Whether floating-to-fixed, or fixed-to-floating, 95% of the time we were simply matching the liabilities and assets, and thus lowering the client's risk.
Many clients have sold a business in return for some interest-bearing LIBOR note. They have the risk of floating rate.
Clients also borrow fixed and invest floating, and thus may have too much 'fixed' risk, the risk that the floating pmts coming in may not cover those payments. I think we mean the same thing, just using different terms.
Obv, the bank stands in the middle and takes 0.5-5bps. They don't make money on directional movements on the desk, just the b/o spread.
|