Negative interest rates are eating away at the profitability of structured finance transactions, as originators find themselves paying more for their interest rate swap hedges but are unable to recoup the costs from noteholders.
Asset-backed securities (ABSs) tend to pay noteholders a floating rate coupon, and so include fixed-to-floating interest rate swaps to hedge the fixed-rate mortgages in the underlying pool. In Europe, the swap's floating rate cashflows reference Euribor. But with the ref
The week on Risk.net, September 8-14, 2018Receive this by email