Derivatives Advisory
Blue Rose Capital Advisors provides the expert guidance and transparency required to execute derivative solutions. From interest rate swaps to other derivative products, we can deliver an innovative solution for almost any given debt scenario. In combination with the derivatives valuation, hedge accounting, and reporting services of our affiliate, HedgeStar, Blue Rose helps our clients strike the right balance between risk and future economic certainty.
Why Organizations Choose an Independent Derivatives Advisor
When your institution enters a derivative transaction, whether an interest rate swap, swaption, or commodity hedge, the counterparty bank has its own interests. An independent derivatives advisor represents only your organization.
Derivatives Advisory Services
Blue Rose serves as your objective advisor throughout the entire derivatives lifecycle: from policy development and product education, through counterparty selection and execution, to ongoing performance monitoring and regulatory compliance.
Our end-to-end derivatives advisory services include:
- Development of risk management policies, procedures, and protocols
- Education of staff and boards on derivative uses, benefits, and risks
- Analysis of derivative products and swap structures
- Negotiation of swap documents and selection of counterparties
- Implementation and unwinding of swaps via competitive or negotiated bid processes
- Monitoring of derivative performance and changes in regulatory environment
Blue Rose has proven expertise in a wide range of derivative offerings and structure, including:
- Interest rate swaps (including basis and constant maturity)
- Credit default swaps
- Asset swaps
- Trigger swaps
- Commodity swaps
- Foreign-exchange (FX) swaps
- Total return swaps
- European and Bermudan swaptions (including callable and puttable swaps)
Qualified Independent Representative (QIR) and Designated Evaluation Agent (DEA)
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 grants safe harbor when end users of swaps are represented by a Qualified Independent Representative (QIR) or a Designated Evaluation Agent (DEA). Blue Rose Capital Advisors can act as a QIR for Special Entities or a DEA for Non-Special Entities.
What is a derivative?
Derivatives are contracts between two parties whose value is derived from the performance of an underlying financial asset or index. They are commonly used by municipalities, higher education and non-profit institutions, and other entities to manage interest rate risk and stabilize borrowing costs. Common derivatives include swaps, options, and futures. Read more about derivative options.
What is hedging (in the context of derivatives)?
Hedging is a financial process that involves using derivatives to minimize risk from market fluctuations. Municipal advisors help organizations execute risk management instruments like interest rates swaps to mitigate volatility affecting their debt portfolio. As a registered CTA, we provide tailored advice on derivatives from start to finish, enabling clients to hedge with confidence.
What is a swap?
A swap is a derivative that is used between two parties to exchange cash flows or liabilities to mitigate risk or reduce costs. For example, an interest rate swap exchanges a variable interest rate for a fixed interest rate. The most common types of swaps include interest rate swaps, currency swaps, and commodity swaps. Our advisors will help you determine which swap is best according to specific risks and your organization’s financial goals. Read more about interest rate swaps.
When should a borrower consider using derivatives?
Borrowers consider derivatives when they have exposure to interest rate volatility or are evaluating ways to optimize debt structure. This may occur during new debt issuance, refinancing opportunities, or when reviewing an existing portfolio for potential cost savings or risk reduction.