Interest rate risk

Fluctuation in the interest rate market exposes loans with floating interest rates to the risk of a rise in the interest rates and interest expenses. The turbulent market movements of the past years serve as a good example of the risk related to interest rate fluctuations. However, you can hedge against such risk with different hedging products.

A loan with a floating interest rate, in other words a loan tied to a Euribor rate, is exposed to interest rate fluctuations because changes in market rates are reflected in the loan’s interest rate when each interest period ends. However, there are many different ways to hedge against interest rate fluctuations. For example, you can fix the interest rate for a chosen period with an interest rate swap, which will remove the effects of interest rate fluctuations. Another option is the interest rate cap, which guarantees a maximum rate for the loan.

The wide range of interest rate hedging products makes it possible to find a hedging solution tailored to your company’s needs. Nordea’s experts assist companies in managing interest rate risk and finding the suitable hedging products.

Products in focus Products in focus

Interest rate swap

Interest rate swap fixes the interest rate on a loan

An interest rate swap is suitable for customers who want to know their interest expenses over the coming years in advance and hedge against a potential rise in the interest rate level.

Interest rate cap

An effective protection against rising interest rates

An interest rate cap offers effective protection against rising interest rates, while retaining the opportunity to benefit from falling interest rates.

Tailored interest rate hedges

Hedge options for different needs

Companies wishing to hedge against interest rate risk must first determine the extent of that risk. In addition to traditional interest rate caps and interest rate swaps, interest rate hedges can be tailored to each customer.

Interest rate hedging

 

Interest rate fluctuations generate a risk

You can hedge against the risk with different hedging products.

 

Hedge against rising interest rates

Companies can choose among different interest rate hedging products available for various needs.