The following are answers to commonly asked questions around market volatility and its impact on debt valuations.

Highlights and analysis of the ASU 2020-04, Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

As rates fall dramatically, many borrowers consider the possible benefits of refinancing fixed-rate loans.

An interest rate swaption is an option that provides the borrower with the right but not the obligation to enter into an interest rate swap on an agreed date(s) in the future on terms protected by the swaption.

A cancellable swap is a combination of an interest rate swap and a receiver’s swaption that may be cancelled by the borrower at no cost on an agreed future date.

An FX option is a contract that confers on the holder the right but not the obligation to exchange an amount of one currency for another at a pre-agreed rate (strike rate) on or before a pre-agreed date.

A commodity put option is a contract that grants the producer the right but not the obligation to sell a specified quantity of a commodity to the consumer at a fixed price before a stated future date.

An FX forward is a contractual agreement between the client and the bank, or a non-bank provider, to exchange a pair of currencies at a set rate on a future date.

A commodity call option is a contract granting the consumer the right but the not the obligation to buy a specified quantity of a commodity from a producer at a set price before a fixed future date.

An interest rate collar is an option used to hedge exposure to interest rate moves. It protects a borrower against rising rates and establishes a floor on declining rates through the purchase of an interest rate cap and the simultaneous sale of an interest rate floor.