Marc Henrard - Multi-curve framework

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...

" La Banque nationale de Belgique s'attend à une perte de 3,7 milliards en 2024 " S'attend? Nous sommes le 17 janvier 2025, l'année 2024 est finie depuis longtemps, d'où vient l'incertitude? Je sais que les prévisions sont difficiles, surtout quand elles concernent le futur. Mais ici on parle du passé. Quand j’étais trader sur un desk de taux, il y a plus de 15 ans, les profits (P/L) on les calculait chaque soir avant de quitter le desk et on vérifiait avec le rapport de middle-office le matin. La puissance de calcul a-t-elle tellement diminué depuis? Il faut plus de temps pour faire les multiplications et additions? Exactement le même titre et le même texte dans les 2 journaux belges francophone principaux – “par Belga”. Pas une analyse, pas un journaliste qui fait une remarque, pas de quatrième pouvoir! Si ce n’est ce blog insignifiant que vous êtes en train de lire? Journalism is printing what someone else does not want printed; everything else is pu...

Why trying to introduce a complex cure for a symptom when there is a simple cure for the disease? This is the question I was asking myself when reading about the Fed and SOFR (repo rate) month-end spikes. The month-end spikes are not a natural economical cycles. They are artificial ones created by the regulators. Balance sheets, liquidity ratios and some other regulatory figures are measured on a monthly or quarterly basis. The quarter ends are becoming important dates for banks. As banks are an important cog in the economy, quarter ends are becoming important for the economy. As a reaction to the (repo) liquidity drying at quarter end, the Fed is proposing some special repo facility to decrease the rate spikes symptoms. But these spikes are totally artificial constructions. Why are the balance sheets still measured only on quarters end only. Nowadays everything in banking seems to be real time and online, from retail payments to complex risk figures like VAR, XVA and IM. Why are balan...

Two recent press articles have attracted my attention Risk: Libor may linger as regulators ‘change tune’ International regulators appear to be coming round to the idea that Libor may have to be kept alive to avoid chaos in some loan and bond markets after the end of 2021. Not a surprise there. My opinion, expressed for several years on this blog, is that " Change of benchmark [...] index is a difficult task " (Sep 2014). One possibility for the Fallback, would be to write "multi-stage fallback" procedures. Some of them are described in my quant perspective on fallback . Related to the potential chaos for some loans and bonds, one could imagine the following approach: fallback triggers for derivatives that are more sensitive than the extreme "discontinuation of publication". One such trigger could be a "FCA verdict" as described in FCA: ‘We can be Libor fallback trigger’ (subscription required). Once we know that the derivatives will tr...

The ECB has decided to published a new unsecured overnight interest rate benchmark. The press released was posted on its website a couple of days ago. No name has been proposed yet for the new benchmark. This would be a new benchmark on top of the existing EONIA and STOXX GC Pooling Index. Those two benchmarks are already the underlying of some derivatives. It is expected that the new index, planned to be published by 2020, will also be used in some derivatives. That would mean three competing overnight benchmarks in EUR all of them with associated derivatives. That would means twelve (12) possible ON derivatives types. One type for each of the benchmarks used as underlying in combination with each of the benchmarks used for the computation of interest on the mandatory VM amounts, to which you have to add futures, which are equivalent to derivatives with a collateral rate of 0. And you have to add the potential difference in capital treatment for the settle-to-market feature . ...

Yesterday night, I finish reading a book. This morning, I was wondering what to do next. Weather is not good enough to play golf, and I was reduced to start a reading a new book or let my imagination wander. I choose the latter, and from imagination to imaginary there was only a short step. And from imaginary to imaginary capital and FRTB another short step. So I decided to create a simple swap position with imaginary capital according to the standard approach of the FRTB. Creating the matrix in rule 77: 10 lines of (Matlab) code. Finding the not positively defined sub-matrices of dimension 3 of the qbove: 10 lines of (Matlab) code Creating an actual position and computing its risk weighted sensitivity and FRTB capital: 50 lines of (Java) code Result: priceless! Priceless has to be understood as the capital required to hold that position is imaginary, and you can not buy imagination for any price! Maybe a little bit more details about the computation. First step is creating ...