The only safe investment is a hedged investment, antthing else is up to your priors.
While interest rates going up as much as they did may have seemed unlikely, it was still irresponsible not to hedge their risk.
While interest rates going up as much as they did may have seemed unlikely, it was still irresponsible not to hedge their risk.
So sure, small banks failing to hedge is irresponsible, but at a large enough scale, someone holds the bag.
Is something similar not possible with interest rates? I imagine for instance someone with lots of cash and little desire for risk could lend their money to the banks at overnight rates, collect the interest, and then offer swaps against that steam, no? Of course, no one's going to get their 10th mansion off of this. A little riskier, someone holding variable payment debts could do the same, as long as the loans are diverse the risk could stay low. In this way, the risk at least shifts from "we're screwed if interest rates change" to "we're screwed if interest rates change and many diverse loans start to fail to make payments" in which case you're probably screwed regardless.