RBS wins Risk Magazine’s Inflation Derivatives House of the Year
RBS Global Banking & Markets has been named Inflation Derivatives House of the Year 2012 by Risk magazine. These awards are recognised as one of the most prestigious in the industry.
“This is a great endorsement, it reinforces the fact that we remain a leader in providing world-class inflation risk management services to our clients,” said Jezri Mohideen, Global Head of EMEA Delta Rates Trading.
Risk magazine was also impressed by RBS’s consistent presence in the euro inflation market, particularly in Italy, despite the eurozone crisis.
“The European sovereign crisis gave us an opportunity to show more than ever the benefit of our sales, trading and structuring teams working together,” said Christian Alibert, Head of Inflation Trading, “to find the optimum balance of both helping clients manage their exposure while also mitigating the risk that this naturally brings to our own trading books.”
Risk also commended RBS for what is believed to be the first-ever launch of an interest rate/ inflation correlation swap, designed as a means of reducing the inflation risk arising when clients might hedge 30-year inflation swaps with so called pay-as-you go inflation swaps.*
To offset the inflation risk, RBS's dealers reinvest the client's cash flows, which they may receive as PAYG receipts in tranches over a 30-year period. The interest rate/ correlation swap comes about when the dealer reinvests the inflation uplift from the client through interest rate swaps: and the rate at which they do that depends on the prevailing Libor rate at the time of execution.
* A pay-as-you-go inflation swap is when a company makes periodic payments to a financial counterparty rather than a one-off payment at maturity.