Marc Henrard - Multi-curve framework

Negative government bond spreads have been a puzzle for some people for a long time. The question has been stated in some places as `` How can the banks borrow at a lower rate than the government? ''. I have already partially given my point of view about that issue in a blog 10 years ago . That was in the context of the LIBOR swaps, but it is still true in the SOFR case. Now I want to add some technical details for the SOFR OIS case. To some extent, I claim that the swap spread have to be negative! SOFR-OIS swap / government spreads In this analysis, I'm using the results of the multi-curve framework in a loose sense. I'm using expected values, without clarifying in which measure they are and extended the results to government bonds. The goal is to indicate that the ISDA definition of SOFR (introduced below) used in swaps may have an hidden impact on swap spreads. For this simplified approach, I'm presenting the impact only for zero-coupon bonds. The notation ...

Different experts in interest rate modelling were kind enough to write an endorsement for the multi-curve new edition book. Part of them are displayed on the back-cover (there is not enough space to display the full texts there). I will publish on this blog the longer versions of them between now the actual book's publication in November. Marc Henrard has written a much needed second edition of his successful and popular multi-curve book. After a number of events, including the so-called LIBOR end hit the markets, and new types of contracts with new types of rates have appeared, together with some instances of survival of the old rates, a book like this has been much needed for the quant community and beyond. I will personally recommend this book to my MSc students who need to navigate the nuance of current interest rate markets. Marc has done a massive work of absorbing the changes introduced both by public institutions and the quant community in a coherent narrative. The boo...

La Belgique se prépare à mettre en place une taxe sur les plus-values (réalisées). Les textes exact n’ont pas encore été votés, il n’y a pas encore de précision sur le mécanisme exact. J’ai essayé de comprendre le mécanisme général, mais j’ai encore pas mal de questions. J’en indique quelques-unes ci-dessous. J’espère que les réponses seront dans le texte final. A défaut, le parlement peut toujours me contacter pour des conseils. Pour les actions en portefeuille à la date de l’entrée en vigueur de la loi (2026-01-01), les plus-values seront calculées sur base de la valeur à cette date. Comment est calculée la valeur d’une action non cotée? Cela doit être disponible pour une action à propos de laquelle le détenteur n’a aucune information (outre le fait d’en être le détenteur d’actions). Les employés de start-up reçoivent souvent des actions d’une société mère qui a une résidence fiscale non-belge. Quelle est la notion de plus-value après l'exercice d’une option? Si j’exerce un cal...

Different experts in interest rate modelling were kind enough to write an endorsement for the multi-curve new edition book. Part of them are displayed on the back-cover (there is not enough space to display the full texts there). I will publish on this blog the longer versions of them between now the actual book's publication in November. This is the book I would have loved to write, but now that I have it in front of me, I realize I would not have matched Marc Henrard's excellence. All the essential aspects needed to understand modern interest rate modelling theory, as well as to apply it in everyday financial practice, are clearly explained with a rigorous yet practical approach. Definitely, it is one of the books that every practitioner of quantitative finance should read and keep at hand. Marco Bianchetti Head of Market and Counterparty Risk IMA Methodologies, Market and Financial Risk Management, Intesa Sanpaolo, Milan Adjunct Professor of Advanced Interest Rate...

The multi-curve book continue its march to production. The final proofs are expected for the end of October for a book publication in November. Find below the book's synopsis. About the Book A new standard in interest rate modelling, called the multi-curve framework, emerged after the financial crisis. The framework covers two important market features: the collateralization of derivative trades and the spread between different rate benchmarks. This book starts from the collateral mechanisms and builds the full framework from the foundations through all the technical and financial details. It kicks off with the collateral discounting in all its variants: domestic cash, foreign cash, or other assets and then introduces the different benchmarks and their associated spreads. Following the discontinuation of certain benchmarks, part of the book is dedicated to the transition and the emergence of the overnight benchmark dominance in certain currencies. Based on the theoretical fram...

Vers un certificat PEB obligatoire pour tous les logements en Belgique ? ” Tel est la question posée dans un article de la RTBF  sur base d’un avis du “ Conseil central de l’économie ” (CCE). Le texte du CCE est disponible à https://www.ccecrb.fgov.be/p/fr/1296/renovation-de-logements-un-besoin-urgent-de-sensibilisation-d-informations-claires-et-de-regles-uniformes/10 Ceux qui me connaissent savent que j’ai déjà une réaction quand je lis “conseil central”. Et quand je lis la proposition d’un certificat PEB obligatoire, je ne peux m’empêcher de penser “ loi de Campbell ” Plus un indicateur social quantitatif est utilisé comme aide à la décision en matière de politique sociale, plus cet indicateur est susceptible d'être manipulé et d'agir comme facteur de distorsion, faussant ainsi les processus sociaux qu'il est censé surveiller. et “ loi de Goodhart ” Toute régularité statistique observée tend à perdre toute crédibilité dès qu'elle est mise sous tension à des fins d...