Macroeconomic (Macro) Swap or Option

A risk management agreement designed to offset some elements of quantity or business cycle risk by linking one or both payments of a standard swap or a swap or spread option to macroeconomic indexes. Obstacles to use of these instruments include (1) weak or inconsistent correlations between economic indexes and the related business risk; and, (2) the reluctance of accountants and regulators to treat them as hedging instruments for reporting purposes. See Global Hedge.

Glossary * M