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Loan-linked hedging for the buy side – Part 1 (of 10): an introduction
Across ten articles, the focus is a topic notorious for its opacity: OTC derivatives, hedging floating benchmark risk for corporate borrowers. We cover significant ground, arming readers, step by step, with the knowledge to visualise best practice documentation between a hedging bank (HedgeBK) and hedging company (HedgeCO) and negotiate terms critical for safe, effective and resilient protection.
Alter starting with what can go wrong, key concepts are addressed: from macro issues (the starting position of standardised ISDA-based documentation; selection of an appropriate trading structure; and the need to understand - in detail - the hedged risk or "underlying"); to micro concerns (addressing what I call "Contractual Basis Risk"; considering the sometimes dangerously unfettered power of HedgeBK to take action; and questioning the involvement of HedgeCO's affiliates).
The series concludes by planning how to approach documentation for "the perfect hedge" and walks through important Schedule provisions. A list of defined terms and expressions for the series is included at the end of this introduction.
26 JUL 2026
