Derivatives · glossary
A dealer, like the bank, quotes prices all day and passes each trade's risk on with a mirror trade. An end-user, like Atlas, hedges something real with one or two trades. Chapter 14
Explained in Chapter 14, The Wider Room, of Derivatives.
Atlas is an end-user: it hedged a loan it really owed, with two trades. Pellhaven is a dealer, which quotes prices all day and holds hundreds of trades. A dealer wants to earn the gap between its buying and selling prices, not to bet on interest rates. So when it sells a swap, it passes the rate risk on almost at once.Read Chapter 14, The Wider Room →
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