Marc Henrard - Multi-curve framework

Game of Benchmarks: Season 2 Game of Benchmarks: Season 2 - Episode 2: Triggers   Question related to: Description of Fallbacks - Triggers In the triggers description, the benchmark to which a fallback would be applied is called “the relevant IBOR”. The list of those relevant IBOR is “GBP LIBOR”, “CHF LIBOR”, “JPY LIBOR”, etc. The relevant IBOR does therefore not include the tenor. It is not clear from the text if the trigger applies on a tenor by tenor basis or on a full “family". Could there be a situation where one tenor, e.g. GBP-LIBOR-12M, is discontinued but not the others in the same family, e.g. GBP-LIBOR-3M. Would the discontinuation of one tenor trigger the fallback for all of them? Could you clarify the tenor/family issue in the FAQ and potentially adapt the trigger wording? Edit on 18-Aug-2018: I have received an answer from ISDA regarding the above question: If the discontinuation is of one tenor only, then it is likely that market participants w...

On 12 July 2018, ISDA has published a Consultation on Certain Aspects of Fallbacks for Derivatives Referencing GBP LIBOR,1 CHF LIBOR, JPY LIBOR, TIBOR, Euroyen TIBOR and BBSW . I'm preparing a quant perspective on IBOR fallback proposals that I will publish in the coming days. In the mean time, by reading the consultation document, I have a certain number of questions related to the clarification of the wording or the formulas proposed. I'm sending the questions to the ISDA email associated to the consultation and I'm also posting them here. I will update the post when I have an answer or a clarification. This is Game of Benchmarks: Season 2 Game of Benchmarks: Season 2 - Episode 1: Compounded Setting in Arrears Rate question   Question related to Option 3: Compounded Setting in Arrears Rate   The three dates that characterise a IBOR fixing are its fixing date, the effective date of the underlying deposit and the maturity date of the same deposit. When ...

Last week, on Wednesday 18 July, LCH has announced the first cleared SOFR linked swaps . According to a Risk article (subscription required), the first trade was a SOFR V EFFR basis swap. Now the real fun start. Compute all the basis and check how they behave!

Financial Fiction Episode 3: Risk-based futures For linear interest rate derivatives, risk and DV01 are considered as very similar expressions. This is also what we can deduce from the name of the latest new futures launch by NASDAQ. Some five years ago, I proposed a new design for interest rate futures that I called risk-based futures. I worked with ASX in 2014 to adapt the design for the AUD market. At the end of 2015, ASX launched a swap futures based on that design . The ASX product has an extra feature of having a variable tick value, but the central feature of the design is the same: a futures price representing a rate or yield and the physical delivery of an ATM trade on the futures expiry. NASDAQ will be launching soon its DV01 Treasury Futures . According to NASDAQ, the new product will be available for trading on Thursday, July 19, 2018, pending regulatory approval . The name "risk-based futures" (1) has been changed to "DV01 futures", but the...

In a recent Risk article ( Clearers diverge on SOFR swaps discounting - subscription required) it was indicated that, contrarily to previous announcements, when CME will start to clear SOFR linked swaps, the interest used for Price Alignment Interest (PAI) will be SOFR itself and not the EFFR which is used for other USD OTC derivatives. This is also a departure from the initial ARRC suggestion. Regarding LCH, the current indication is that it will clear SOFR linked swaps with EFFR PAI. This means that out of the six variations of overnight-linked derivatives discussed in a previous blog , five will be available in Q3. It is not certain that the sith variations will ever be really traded, but we can expect that if SOFR is becoming the benchmark benchmark (I'm not sure it is the correct term, but it seems appropriate here) at some stage some legacy EFFR OIS will switch to SOFR for collateral. From a long term perspective, it seems logical to clear SOFR based swaps using SOFR collat...