Marc Henrard - Multi-curve framework

Variation margin With the generalization of variation margin collateral, the derivative world is not driven anymore by discrete cash flows but continuous dividend. This can be explained with the following two graphs. Figure 1: Derivative value Suppose that you have entered into a derivative in the past. In the graphs that date was 20 days ago and the X axis represent the time. You entered into the trade at fair price, so the initial value was 0. Time has past and the value has gone up and down. The Y axis of the same graph is the value. The current value is positive. As the party to the trade are uncertain that their counterpart will honor its derivative obligations, it is now standard to ask for variation margin related to the derivative. In this context variation margin is the exchange on a daily basis of collateral to guarantee the obligation. The party out-of-the-money (for which the value is negative) is posting financial instrument with the same value as the trade as a g...

In the last years, I have reviewed the methodologies of the world largest OTC swap CCPs , read most of the recent related regulatory changes , research the impact of those changes on valuation and implemented most of them in libraries . Those exercises combined with my background in quantitative analysis and trading give me a unique perspective on the changes in the derivative market infrastructure . As part of the recent advisory engagements related to the above subjects, I ran several workshops on margins in Europe and in the US. Those workshops have been offered as one day or two days programs. Below are a short summary and the agenda of a typical workshop. The workshops are always tailored to the audience. Don't hesitate to contact me for more information or to request a similar workshop in-house. Summary One impact of the crisis has been the increase of the spread between different reference rates. Another impact has been the regulatory efforts to try to reduce the system...