# Outturn

**1.**

'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.

Outturn market rates may be compared with, for example, forecast rates, expected rates, or hedged rates.

**Example 1**

If hedging a borrowing with an interest rate option with a strike price of 6%.

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).

At an outturn market rate of 5% the borrower's option would lapse worthless.

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.

**Example 2**

So continuing the same example, and assuming an option premium paid of 0.5%.

**(i) At an outturn rate of 5%**

The hedged rate borrowing achieved:

= 5% market rate + 0.5% option premium

= 5.5%.

**(ii) At an outturn rate of 8%**

The hedged borrowing rate achieved:

= 6% option strike price + 0.5% option premium

= 6.5%.

**2.**

The result or the net result of any activity.

**3.**

The all-in hedged rate or outcome achieved, as a result of hedging activities.