1,720,985 research outputs found
Two Curves, One Price
No full textThe financial crisis has multiplied the yield curves used to price plain vanilla interest rate derivatives, making
classic single-curve no-arbitrage relations and pricing formulas no longer valid. Marco Bianchetti shows that
no-arbitrage can be recovered by taking into account the basis adjustment bootstrapped from market basis
swaps, and that generalised no-arbitrage double-curve pricing formulas can be derived for vanillas by using
the foreign currency analogy, including a quanto-like adjustment typical of cross-currency derivatives. Both
the basis and the quanto adjustments find a simple financial interpretation in terms of counterparty risk
FVA for general instruments
No full textComputing the funding valuation adjustment (FVA) is hard, as it requires the numerical solution of generally non-linear partial differential equations . In this paper, Alexander Antonov, Marco Bianchetti and Ion Mihai develop a universal and efficient approach to numerical FVA calculation for portfolios of general instruments with multiple stochastic assets and funding sources
Interest Rate Modelling after the Financial Crisis
No full textTypically literature on the subject of interest rate modelling is based on the assumption of risk-free interest rate markets. Clearly this assumption no longer holds. As a consequence of the crisis, market participants have been alerted to risk factors which had previously been neglected. This knowledge has led to important changes in the patterns of market data and to new approaches in interest rate modelling.
As interest rate markets continue to innovate and expand in this new landscape, it is becoming increasingly important to remain up-to-date with the latest practical and theoretical developments. In Interest Rate Modelling after the Financial Crisis, Massimo Morini and Marco Bianchetti address and explicate these changes, gathering the latest ideas on post-crisis market modelling and applying new methods to market data and market practice
Bootstrapping the Illiquidity: Multiple Yield Curves Construction for Market Coherent Discount and FRA Rates Estimation
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Bostrapping the Illiquidity: Multiple Yield Curves Construction for Market Coherent Forward Rates Estimation
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