Marc Henrard - Multi-curve framework

An interesting follow-up article in Risk magazine about Swiss rate reform: Swiss rate reform in race against the clock (subscription required). With respect to the previous Risk article on the same subject , it presents a more balanced view and not only the point of view of the WG on benchmark reform. At lot of the opinions expressed are closer to what could be found in my first blog on the subject. Chris Davis, the author of the Risk article, found my blog on the subject and contacted me. We had a roughly 30 minutes discussion. He used a lot of the background information from the discussion and from my blog for the article, even if only two sentences from the discussion were quoted. I was surprised that my blog was not explicitly cited in the references, as would be customary when the blog presented original research and analysis and was used for background information. On my side I will continue to reference Risk explicitly when I read something of interest in it. On top of the sub...

In my previous blog , I discussed the attempt by the National Working Group on CHF Reference Interest Rates to modify the CHF overnight benchmark index. Since my blog has been published, the minutes of the WG meeting have been published on the Swiss National Bank (SNB) website . The minutes also include the list of participants to the group. In one of the documents, an ISDA representative indicates that the guidance are " non-legally binding " and " could be used as a tool for bilaterally negotiating amendments to contracts ". The core of the issue is in the "non-legally binding" and "bilateral" words, but they seem to be largely ignored in the guidance. The issues related to the change of benchmark overnight index are of three types. Contract modification. There will be changes in a lot of contracts (OIS and CSA). That will require a bilateral agreement on each of them individually. Valuation. Changing the contracts has valuation impact...

In a blog published in September 2014 , I claimed that a change of benchmark overnight index is a difficult task. A that time the claim was a reaction to US Federal Reserve and ISDA suggestions that changing the main USD overnight index from "Fed Fund effective" rates to a general collateral overnight index (DTCC GCF Repo Index) was easy. The reason behind that difficulty was described in that blog and, to my opinion, the misconception that it could be easy comes from a misunderstanding of what "OIS discounting" means. As you know, I'm not a fan of the terminology as it hides too many fundamental issues behind the mechanism (see Section 8.1 of my book on the multi-curve framework ). People realized the difficulty of the process and in particular a US Treasury staff later commented that "Any transition away from a dominant benchmark will surely be complex and lengthy". That comment lead me to ask Did the US Treasury read my blog? In the present blog, ...

The blog's title may seems a little bit cryptic. It is how I feel after ready the long expected FAQ of the BCBS on some issues related to the FRTB. The BCBS document is available on the BIS web site: https://www.bis.org/bcbs/publ/d395.pdf Before going to the explanation of the title itself, a little bit of history is required. In December 2014, the BCBS published a document on " Fundamental review of the trading book: outstanding issues " and welcomed comments on the proposal. I send my comments to the Committee in February 2015. The comments to the Committee, including mine, have been published on the BIS website shortly after: http://www.bis.org/bcbs/publ/comments/d305/overview.htm . I have commented on the issues in several of my blogs, the first one is Commenting on the Fundamental Review of the Trading Book from March 2015. The first item on my comments was related to "Computation method for PV01". The original BCBS text was: My suggestion, after...

In September 2014, in my blog Change of benchmark overnight index is a difficult task , I described why I thought that a change of benchmark for rate paid on collateral or as a reference for swap is a difficult task. The above blog was a reaction to comments from senior derivative figures indicating the opposite. Fast forward two years, it seems that my message has been heard by the US Treasury. Yesterday, in another Risk article titled US Treasury: prepare for a post-Libor world (subscription required), one can read: Daleep Singh, US department of the Treasury: Any transition away from a dominant benchmark will surely be complex and lengthy[…] To compare with my blog: Change of benchmark overnight index is a difficult task. Run, up to the maturity of the longest trade existing in the world linked to fed funds, two parallel markets. Risk magazine Concern among market participants […] A similar move could result in disputes between counterparties about the value of legacy...

Picture taken in New York on the “ Library Way ”situated on East 41th Street. It summarizes my feeling about writing, except that I have not reach the final stage, the stage of trouble. At least I don’t think so. Writing your name can lead to writing sentences. And the next thing you’ll be doing is writing paragraphs, and then books. And then you’ll be in as much trouble as I am! Jerome Lawrence and Robert E. Lee, The Night Thoreau Spent in Jail.

I have open a new public repository on GitHub. There was already a repository related to the code associated to my forthcoming book Algorithmic Differentiation in Finance Explained . The repository is: https://github.com/marc-henrard/algorithmic-differentiation-book I have made public a second repository, called analysis . The idea of the repository is to share analysis of financial situations by quantitative methods. Instead of simply reporting the description of the results through my blog, I will also made the code of the analysis publicly available when it make sense. The new repository is available at https://github.com/marc-henrard/analysis The first code is the one used in the Imaginary Butterfly blog post. As usual, comments are welcome.