IRHP Unwind Value (Break Costs)

AHV can assist companies in unwinding derivative transactions such as interest rate or foreign exchange hedges resulting in a lower Break Cost.

Often, the provider of the hedge is contractually bound to unwind the hedge at ‘market’ prices or at a cost that it has suffered as a result of the early unwind.  However, in our experience the company often pays far more.

The key to achieving a lower Break Cost is not merely the ability to value the product given the prevailing market circumstances, but rather to negotiate an advantageous Break Cost.  The provider of the hedge may attempt to justify the cost using various arguments.  An intimate knowledge of the products and their pricing techniques allows AHV to negotiate the price effectively.  A saving of  approximately 15% to 20% can be achieved – see case study [5].