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Interest Rate Management

The active management of interest rate and currency risks is an integral part of the risk management (RM) performed by companies today.
Risk management, which was originally anchored in the asset/liability management departments of banks, is gaining ever more strategic importance in the treasury departments of industrial companies. Active interest rate management can help to optimise potential earnings and minimise the risk of loss. Risk management has proven its worth in the area of real estate, investment fund and asset management in recent years, providing for measurable improvements in performance.
As interest rate derivatives can be used in so many different fields of risk management, municipalities and cities have now also become active users of these instruments. The ongoing development of new interest rate and currency derivatives has played a major role in this respect. The volumes of interest rate and currency derivatives have increased dramatically in the past few years - and so has the complexity of these products. This has made it possible to develop tailor-made solutions for institutional investors with the aim of increasing a given risk/return ratio.
Private clients can also participate in the derivatives market via certificated structured products.
The following pages contain information that might help you answer the following questions:

• Where do interest rates stand now?
• How can we interpret the existing environment?
• Can historical interest rates be used as a basis to draw conclusions as regards the current situation?
• What interest rate management strategy can be used to limit the company's specific risks?
• What stage of development has been reached in interest rate management (what are the latest structures and how well developed are exotic options)?

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