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To: mishedlo who wrote (211682)	12/28/2002 1:12:27 PM
From: GraceZ	Read Replies (1) \| Respond to of 436258

The author doesn't understand swaps, so he assumes no one else does. The swaps are done not to speculate on the direction of interest rates (he called them "side bets") but to off set the risk of interest rates moving against them, they are a hedge. Hedges are risky in that there is always the outside possibility that both sides of a seesaw will move in the same direction (as in what happened to LTCM) but it's a very low probability event. The hedge is to protect them against an event that has a much higher probability.