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If a floating rate borrower hedges their interest rate risk by entering a swap as the fixed rate payer, and the swap subsequently develops a

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If a floating rate borrower hedges their interest rate risk by entering a swap as the fixed rate payer, and the swap subsequently develops a negative value: then the swap has not been an effective hedge the cost of funds for the borrower will rise then the borrower has paid lower than expected interest to their lender o the cost of funds will exceed the swap rate Previous Next

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