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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.