Source page: McKinsey & Company
Commentary
Hedging against market volatility
Banking | Financial services
July 1, 2024 – Hedging of interest rate risk was a less prominent activity for banks when rates were lower. Now, European banks have increased their use of interest rate derivatives in response to shifts in rates and in customer deposit behaviors, partner Andreas Bohn and coauthors explain. In 2023, the traded volume of euro-dominated interest rate derivatives rose 3.4-fold compared with 2020.
To read the article, see “Banking on interest rates: A playbook for the new era of volatility,” June 4, 2024.
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Visual form
Stacked bar chart.
Layout / body structure
A single quarterly time-series chart runs from 2013 to 2023, with the notes sitting inside the upper middle of the page above the later bars. The reading order is left to right across the quarters and then through the annotation text.
What is being compared
It compares European interest-rate derivatives trading over time and breaks the total into fixed-for-floating swaps, forward rate agreements, and overnight indexed swaps.
Measurement system
The y-axis is traded notional in trillions of dollars and the x-axis is calendar time by quarter. Color separates the three derivative types, and stacked height shows the total market activity in each quarter.
Visible structure inside the graphic
Each quarter is one stacked bar with a dark base, a medium-blue middle, and a light-blue top. Annotations split the earlier low-rate era from the later volatile-rate environment and make the post-2021 jump easier to read.
Main takeaway from the visual
The chart shows a sharp rise in hedging activity once rates become more volatile, with much taller stacks in 2022 and 2023 than in the long stretch before that.
Key standout values or extremes
Most bars before 2021 stay under the low teens, while the later surge pushes the stack into the twenties and up near the mid-thirties at its peak, with the biggest jump carried by the dark overnight-indexed-swap base and the added swap layers above it.
Controls / sequence, when applicable
This is a static chart image with no in-chart controls to operate.
Companion media, when applicable
There is no separate companion audio or video; the chart image is the full visual on this page.