> If both OpenAI and AMZN expect real rates to keep rising while inflation spirals out of control, this deal makes a lot of sense for both of them. They're just duration hedging
It can’t be the same hedge on both sides of the trade.
Why vol? They're just short rates, which is a silly way to say leveraged. If rates become volatile but halve, OpenAI does fine. If rates stabilise at 10%, OpenAI fails. There is no "duration hedging," which for OpenAI would involve buying duration, i.e. bets that profit when rates go up, going on.
It can’t be the same hedge on both sides of the trade.