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imported>Doug Williamson |
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| | A model of a financial or other process, especially one containing random components. |
| 'Outturn' market rates are the rates or prices which actually occur in the relevant market - in other words the rates which 'turn out' to be the case in the market.
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| Outturn market rates may be compared with, for example, forecast rates, expected rates, or hedged rates.
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| For example if hedging a borrowing with an interest rate option with a strike price of 6%.
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| At an outturn market rate of 8% the borrower's option would be exercised (and pay out to the holder assuming it was cash-settled).
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| At an outturn market rate of 5% the borrower's option would lapse worthless.
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| Outturn rates in this sense are related to - but different from - the all-in hedged rates achieved. The ''hedged rate achieved'' means the total income or expense resulting, taking account both of the underlying exposure and of the hedging instrument.
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| So continuing the same example, and assuming an option premium paid of 0.5%.
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| i. At an outturn rate of 5%, the hedged rate borrowing achieved = 5% market rate + 0.5% option premium = 5.5%.
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| ii. At an outturn rate of 8%, the hedged borrowing rate achieved = 6% option strike price + 0.5% option premium = 6.5%.
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| The result or the net result of any activity.
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| The all-in hedged rate or outcome achieved, as a result of hedging activities.
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| == See also == | | == See also == |
| * [[Expectations theory]] | | * [[Financial model]] |
| * [[Hedging]] | | * [[Stochastic]] |
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| | [[Category:The_business_context]] |
Latest revision as of 11:21, 2 July 2022
A model of a financial or other process, especially one containing random components.
See also