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MM084: Carnage in UK Bond/FX Markets – What happened, what’s next?

Market Maker

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Using Derivatives in a Leveraged Swap Strategy to Meet Future Liabilities

Pension funds use derivatives called swaps, okay, interest rate swaps. Part of the LDI kind of investment strategy is using some of the money that you have in your pension fund. Pension funds are going a bit further and asking: can't we use leverage to get best of both worlds? It's all fine until it's not, and then we have a massive situation like what happened this week.

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