Buy now, cry later

The role of derivatives in sovereign and local government borrowing has been in the spotlight since February, when a 2001 cross-currency swap between Greece and Goldman Sachs hit the headlines again.

That trade, first reported in Risk in 2003 (Risk July 2003, pages 20–21), used an off-market swap rate that enabled the Hellenic Republic to reduce its public debt figures by a few billion euros. Far from being an anomaly, trades of this type – where derivatives are effectively used to borrow money