Financial engineering

Interest rate risk management forms part of a hedging approach undertaken by the majority of companies and can be defined as a hedging policy intended to limit the impact of interest rate movements both upwards and downwards.

Fixed products

Fixed products allow the user to fix a lending or borrowing rate immediately; they therefore allow the user to protect against an unfavourable exchange rate movement but they do not allow him to gain from a movement of rates in his favour.
• Forward Rate Agreements (FRA)
  A FRA is an instrument which guarantees an interest rate. It is a private contract between two parties which, on its conclusion, allows the purchaser to obtain a guaranteed interest rate on a loan or on a future deposit on the money market.
• Swap
  An interest rate swap is a private contract which allows two parties to exchange interest payments at fixed dates:
  • either on two interest rates, one fixed and the other variable in the same currency (interest rate swap),
  • or on two variable interest rates (basis swap).

Option products

Option products allow the user to hedge against either an increase or a decrease in interest rates while at the same time being able to benefit from an interest rate change in the user's favour: in order to achieve this, they use the principle of an "option" a combination of these facilities gives rise to :
• Swaption
  Swaptions allow the user to buy or sell the right to conclude an interest rate swap over a specific period; it is an option, the underlier of which is an interest rate swap contract.
• Cap
  A cap is an option which, in return for the payment of a premium, allows the purchaser to protect against an increase in variable interest rates above a certain ceiling level.
• Floor
  A floor is an option which, in return for the payment of a premium, allows the purchaser to protect against a decrease in variable interest rates below a certain floor level.
• Collar
  The principle of a collar (tunnel) is the purchase of an option to hedge against a risk and the sale of another to reduce the premium.

Structured products

A structured product is a combination of financial assets and derivative financial instruments. This combination aims to reproduce a particular risk/reward profile.

Trading room

The NISEBK trading room offers a full range of services covering the majority of financial products and foreign exchange transactions. Our team and its experienced specialists work closely with your manager to provide extensive and customised monitoring, high-quality advice and perfect execution of your orders. Our desire to expand our client base is demonstrated by our fees which are attractive compared to the competition.


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