LDI Dead?

[WWSituation]

Originally Posted by Kenshiro

It's far more prevalent than it was in the past.

If you have access to a database of public financials, it shouldn't be too hard to estimate which companies implemented some form of LDI based on their 2008 annual filings.

It's interesting to see the opinions people had 2 years ago. JMO looks like she supported the traditional actuarial viewpoint (as opposed to the financial economics viewpoint). She's obviously changed her position since then.

Would you still suggest swaps as a method to hedge interest rate risk, WW?

Even though swaps are less liquid than they were a few years ago, I would use no other instrument to run a large interest rate hedge. I've been out of the picture too long to know how well the rate tracks the idiosyncratic liability discount rate so obviously if there is a disconnect then swaps become less usable, though I'd have my firm insisting to use the swap curve to value liabilities. From a capital allocation standpoint, swaps still allow a company to use minimal cash for the interest rate hedge.