- Within clientÔÇÖs portfolio of interest rates hedging products, a 7-year deal linked to the yield curve and with a EUR 200m notional is identified.
- The product bears very high interests when the yield curve is inverted.
- Variance employs its advanced proprietary software tools to perform an in-depth risk analysis under different market scenarios (e.g. inverted yield curve, changes in Euribor rates, etc.).
- Variance proposes cancelling the structured product and financing the premium through an extended annuity, taking advantage of market conditions at the time (mark-to-market of EUR 7.7m).
- Variance provides trade execution transparency and helps the client to be in a good position to negotiate with the financial institution.
- The client clears out any risk linked to yield curve inversion and all other components within the structured product, which present a significant worsening potential (i.e. productÔÇÖs cancelling price: EUR -12.9m).
- The proposed annuity generates immediate interest savings worth EUR 350k per quarter, as the premium is spread over a longer period of time.
- Although the restructuring is made with a different financial counterparty, the client can remove the original structured product from their books via a novation.
- Variance provides trade execution transparency and provides the client with the tools that allow then to be in a good position to negotiate with the financial institution.