[Asia Economy Reporter Hwang Yoon-joo] Mirae Asset Global Investments' US ETF management subsidiary ‘Global X’ announced on the 7th that it has listed two US interest rate-related ETFs, the ‘Global X Interest Rate Hedge ETF’ and the ‘Global X Interest Rate Volatility & Inflation Hedge ETF,’ on the New York Stock Exchange.
The Global X Interest Rate Hedge ETF (IRHG) is an ETF that generates profits when long-term interest rates rise or interest rate volatility increases. It purchases payer swaptions on ETFs investing in US Treasury futures or US Treasuries.
A swaption is a derivative product, an option whose underlying asset is an interest rate swap. An interest rate swap is a derivative that exchanges cash flows between fixed and floating interest rates. The swaption buyer has the right to pay fixed interest and receive floating interest, generating profits when interest rates rise.
The Global X Interest Rate Volatility & Inflation Hedge ETF (IRVH) is an ETF that generates profits when inflation rises or the spread between short- and long-term interest rates widens. It purchases US Treasury Inflation-Protected Securities (TIPS) and payer yield curve spread options.
US Treasury Inflation-Protected Securities (TIPS) are a type of government bond. While the bond interest rate is fixed, the principal is adjusted according to the Consumer Price Index (CPI) level, so when inflation rises, the yield also increases.
Yield Curve Spread Options are options that generate profits as the spread between short- and long-term interest rates widens. The Global X Interest Rate Volatility & Inflation Hedge ETF purchases spread options using the yield spread between 2-year and 10-year US Treasury bonds.
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