John Kiff

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Bank publications

Bank of Canada Review articles

December 15, 2000

The Federal Government's Use of Interest Rate Swaps and Currency Swaps

Bank of Canada Review - Winter 2000-2001 John Kiff, Uri Ron, Shafiq K. Ebrahim
Interest rate swaps and currency swaps are contracts in which counterparties agree to exchange cash flows according to a pre-arranged formula over a period of time. Since 1985, the federal government has been using such swaps to manage its liabilities in a cost-effective and flexible manner. The authors outline the characteristics of swap agreements and the ways in which the government uses them. They show that the swap program has been cost-effective, estimating that past and projected savings exceed $500 million. The authors also discuss the methods that the government uses to monitor the counterparty credit risk associated with these transactions.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Interest rates
November 16, 2000

Credit Derivatives

Bank of Canada Review - Autumn 2000 John Kiff, Ron Morrow
Credit derivatives are a useful tool for lenders who want to reduce their exposure to a particular borrower but are unwilling to sell their claims on that borrower. Without actually transferring ownership of the underlying assets, these contracts transfer risk from one counterparty to another. Commercial banks are the major participants in this growing market, using these transactions to diversify their portfolios of loans and other risky assets. The authors examine the size and workings of this relatively new market and discuss the potential of these transactions for distorting existing incentives for risk management and risk monitoring.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Credit and credit aggregates, Financial markets, Market structure and pricing

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