Marc Henrard - Multi-curve framework

A couple of days ago, the US Alternative Reference Rates Committee has published an announcement regarding its " preferred alternative reference rate ". The announcement can be found on the New York fed web site at https://www.newyorkfed.org/arrc/announcements.html . The proposed rate is based on repo transactions. It is certainly a useful new benchmark and a useful reference for " new USD derivatives ". A discussed previously in this blog in post on similar subjects, and as implied by the name of the committee, this is an alternative reference rate, not a replacement of the LIBOR rate. The repo rates have a different credit implication than the inter-bank transactions underlying LIBOR. The risk management and valuation features of the two benchmarks will be different. The new benchmark will lead to " certain new U.S. dollar derivatives ". Implicitly, this means also new markets, new clearing infrastructure, and new master agreements and CSAs. The alterna...

The Wall Street Journal (WSJ) ran a piece this week-end titled " The Quants Run Wall Street Now ". Some pictures of me are in the WSJ library; they took them at a presentation I gave at The Thalesians last month. They used one of those pictures to illustrate "the quants". The picture illustrating the article is Figure 1: Me with the first step of AAD printed on my face and the recursive formula on my shirt. Following the article, I feel the need to clarify a couple of "details". First of all, I'm not running anything or anybody at Wall Street. You may thing that this is a pity for human society, but personally, I feel very good about it and I don't want to run anything or anybody; nevertheless I don't mind speaking to people who want to listen to me willingly. This is the case for practitioners, regulators, academics, and journalists. Now about the content of the article. It discusses the increasing importance of "quants"...

I have just received the first proofs of my forthcoming book "Algorithmic Differentiation in Finance Explained". After a couple of months of editorial lethargy, the matter is moving again. Hopefully the book will be available before the summer holidays. The book is already announced on Amazon !

I was once asked to explain the P/L explain report. Something must be wrong in my story telling if I have to explain the explanation. After the failure of my story telling career, I decided to move to story writing. This note is an attempt at starting my new career. The full text is available as PDF: Profit explain explained

I will be speaking at The Thalesians seminar on SIMM and SA FRTB: double AD Seminar starts at 6:30pm on Wednesday 19 April 2017 at City University Club Champagne will be served before the seminar, around 6:00pm. Register at Meetup: https://www.meetup.com/thalesians/events/238981871/ Abstract Algorithmic Differentiation (AD) has been used in engineering and computer science for a long time. The term Algorithmic Differentiation can be explained as ``the art of calculating the differentiation of functions with a computer. Over the last 5 years, AD has made its road to quantitative finance. The most straight forward use of AD is to compute the sensitivity of PV to market inputs. In the frame of SIMM and SA FRTB computation, those sensitivities are the main input and having an efficient way to produce them is important. Once the IM/Capital number is computed, there are a lot of potential analysis which are handy, like marginal IM and IM attribution. Those anal...

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...