This paper studies the hedging effectiveness of interest rate swaps using different reference rates for eliminating interest rate risk from floating rate loans. Two reference rates are studied. The first rate’s maturity, \(\Delta\), matches the payment interval of floating rate loans. The second has an incompatible maturity \(\Delta /N\). The prime examples are LIBOR and SOFR, respectively. We show that the \(\Delta\)-based swap provides a good static hedge, but the \(\Delta /N\)-based swap does not. Although dynamic hedging with the \(\Delta /N\)-based swap is possible under some conditions, it both introduces model risk and increases transaction costs, making it a less practical alternative.

本文研究了使用不同参考利率的利率掉期对冲效果，以消除浮动利率贷款的利率风险。研究了两种参考率。第一个利率的期限\(\Delta\)与浮动利率贷款的支付间隔相匹配。第二个具有不兼容的成熟度\(\Delta /N\)。主要的例子分别是 LIBOR 和 SOFR。我们展示了基于\(\Delta\)的掉期提供了良好的静态对冲，但基于\(\Delta /N\)的掉期没有。尽管在某些情况下可以使用基于\(\Delta /N\)的掉期进行动态对冲，但它既引入了模型风险，又增加了交易成本，使其成为不太实用的替代方案。