Interest Rate Derivatives - Risk.net
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en-gbBanks calm on Eurex-LCH basis volatilityPast basis blowouts prepared banks for movements, say traders http://www.risk.net/derivatives/interest-rate-derivatives/4707451/banks-calm-on-eurex-lch-basis-volatility
http://www.risk.net/derivatives/interest-rate-derivatives/4707451/banks-calm-on-eurex-lch-basis-volatilityMon, 10 Apr 2017 04:00:00 +0000Mixing SABR models for negative ratesAntonov, Konikov and Spector use an exact formula for the normal free boundary SABR to construct an arbitrage-free mixed SABR model http://www.risk.net/derivatives/interest-rate-derivatives/4717846/mixing-sabr-models-for-negative-rates
http://www.risk.net/derivatives/interest-rate-derivatives/4717846/mixing-sabr-models-for-negative-ratesFri, 07 Apr 2017 13:32:28 +0000Swiss rate reform set to trigger swap value changeTois discounting rate set to be replaced in 2018 by Saron, which is 20bp lower http://www.risk.net/derivatives/interest-rate-derivatives/3912331/swiss-rate-reform-set-to-trigger-swap-value-change
http://www.risk.net/derivatives/interest-rate-derivatives/3912331/swiss-rate-reform-set-to-trigger-swap-value-changeMon, 13 Feb 2017 06:00:00 +0000OTC market resisting swap futures threatSwap futures yet to break out, but backers see margin, accounting and Citadel as tailwinds http://www.risk.net/derivatives/interest-rate-derivatives/2478949/otc-market-resisting-swap-futures-threat
http://www.risk.net/derivatives/interest-rate-derivatives/2478949/otc-market-resisting-swap-futures-threatMon, 05 Dec 2016 08:33:00 +0000Swap 4175: how a hedged loan became a €600m disputeCity of Linz v Bawag case underlines risks in municipal derivatives http://www.risk.net/derivatives/interest-rate-derivatives/2474984/swap-4175-how-hedged-loan-became-eu600m-dispute
http://www.risk.net/derivatives/interest-rate-derivatives/2474984/swap-4175-how-hedged-loan-became-eu600m-disputeWed, 26 Oct 2016 06:05:00 +0000BoE plans could force change to Libor-Sonia swap paymentsReformed Sonia proposals may see floating-leg settlements delayed http://www.risk.net/derivatives/interest-rate-derivatives/2474665/boe-plans-could-force-change-libor-sonia-swap
http://www.risk.net/derivatives/interest-rate-derivatives/2474665/boe-plans-could-force-change-libor-sonia-swapWed, 19 Oct 2016 23:10:00 +0000Flylets and invariant risk metricsKharen Musaelian, Santhanam Nagarajan and Dario Villani show how to build robust risk metrics for bond returns based on a global structure in the form of principal components and a novel quasi-local representation for the residuals http://www.risk.net/derivatives/interest-rate-derivatives/2472874/flylets-and-invariant-risk-metrics
http://www.risk.net/derivatives/interest-rate-derivatives/2472874/flylets-and-invariant-risk-metricsTue, 04 Oct 2016 10:07:00 +0000Negative Euribor erodes securitisation profitsImplicit floors in notes leave originators facing cost of negative rates on hundreds of tranches http://www.risk.net/derivatives/interest-rate-derivatives/2470877/negative-euribor-erodes-securitisation-profits
http://www.risk.net/derivatives/interest-rate-derivatives/2470877/negative-euribor-erodes-securitisation-profitsThu, 15 Sep 2016 23:05:00 +0000Interest rate models enhanced with local volatilityIn this paper, Lingling Cao and Pierre Henry-Labordère complement generic interest rate models with local volatility. They derive an exact Dupire-like formula for the local volatility. An efficient calibration scheme is then achieved with the particle method as introduced in Guyon & Henry-Labordère (2012) http://www.risk.net/derivatives/interest-rate-derivatives/2469216/interest-rate-models-enhanced-with-local-volatility
http://www.risk.net/derivatives/interest-rate-derivatives/2469216/interest-rate-models-enhanced-with-local-volatilityTue, 30 Aug 2016 13:34:00 +0000Opened interest: foreign firms eye China's rate swap marketThe opening of the interbank bond market to foreign investors should be a boon for onshore interest rate derivatives markets. But participants say there are a number of hurdles to clear before it can take off http://www.risk.net/derivatives/interest-rate-derivatives/2465890/opened-interest-foreign-firms-eye-chinas-rate-swap
http://www.risk.net/derivatives/interest-rate-derivatives/2465890/opened-interest-foreign-firms-eye-chinas-rate-swapMon, 25 Jul 2016 23:05:00 +0000LCH-JSCC basis to boost XVA acceptance in Japan Prices now "can't be explained without reference to XVAs", says Nomura credit head http://www.risk.net/derivatives/interest-rate-derivatives/2460940/lch-jscc-basis-boost-xva-acceptance-japan
http://www.risk.net/derivatives/interest-rate-derivatives/2460940/lch-jscc-basis-boost-xva-acceptance-japanThu, 09 Jun 2016 07:21:00 +0000Mortgage investors grapple with negative swap spreadsCollapse of US swap rate creates problems for valuation models http://www.risk.net/derivatives/interest-rate-derivatives/2459675/mortgage-investors-grapple-negative-swap-spreads
http://www.risk.net/derivatives/interest-rate-derivatives/2459675/mortgage-investors-grapple-negative-swap-spreadsFri, 27 May 2016 12:13:00 +0000Nordic clearing members eliminate Skr288 billion IRS notionalNasdaq Clearing’s first compression run to be continued twice a year http://www.risk.net/derivatives/interest-rate-derivatives/2454827/nordic-clearing-members-eliminate-skr288-billion-irs
http://www.risk.net/derivatives/interest-rate-derivatives/2454827/nordic-clearing-members-eliminate-skr288-billion-irsMon, 18 Apr 2016 07:30:00 +0000Indian rate options underlyings insufficient, say tradersLack of long-term reference points could hold back proposed market http://www.risk.net/derivatives/2450565/indian-rate-options-underlyings-insufficient-say-traders
http://www.risk.net/derivatives/2450565/indian-rate-options-underlyings-insufficient-say-tradersFri, 18 Mar 2016 00:05:00 +0000Dealer algos strike back in swaps market showdownAuto-quoting starting to take root as incumbents try to keep pace with Citadel http://www.risk.net/derivatives/interest-rate-derivatives/2446836/dealer-algos-strike-back-swaps-market-showdown
http://www.risk.net/derivatives/interest-rate-derivatives/2446836/dealer-algos-strike-back-swaps-market-showdownWed, 24 Feb 2016 07:15:00 +0000Hungary central bank action ‘distorting’ swaps curveThe Central Bank of Hungary has offered up 1 trillion forint notional of cheap interest rate swaps, driving down bids for receiver swaps and government bond yields, say dealers http://www.risk.net/derivatives/interest-rate-derivatives/2447519/hungary-central-bank-action-distorting-swaps-curve
http://www.risk.net/derivatives/interest-rate-derivatives/2447519/hungary-central-bank-action-distorting-swaps-curveFri, 19 Feb 2016 06:00:00 +0000Japan’s Quick takes on MarkitWire with domestic affirmation serviceJapanese language service targets domestic regional banks http://www.risk.net/derivatives/interest-rate-derivatives/2446878/japans-quick-takes-markitwire-domestic-affirmation
http://www.risk.net/derivatives/interest-rate-derivatives/2446878/japans-quick-takes-markitwire-domestic-affirmationSun, 14 Feb 2016 23:00:00 +0000What credit auction friction says about the OTC marketBenefits of risk bifurcation threatened by collateral conflicts http://www.risk.net/derivatives/interest-rate-derivatives/2445814/what-credit-auction-friction-says-about-otc-market
http://www.risk.net/derivatives/interest-rate-derivatives/2445814/what-credit-auction-friction-says-about-otc-marketWed, 10 Feb 2016 04:07:00 +0000Non-parametric local volatility formula for interest rate swaptionsThe volatility smile in the interest rate derivative models has long been an important topic in theory and practice. With a growing divergence of monetary policy cycles between the US and Europe, there is a stronger need for robust smile models that would allow for pricing illiquid, out-of-the-money and exotic interest rate products. Dariusz Gatarek, Juliusz Jabłecki and Dong Qu propose a simple Dupire-like local volatility formula that works for swaptions. Working in a Cheyette-type quasi-Gaussian framework, they link the resulting swap rate local volatility to the dynamics of two state variables parameterising the entire evolution of the interest rate curve, which allows for fast and accurate calibration http://www.risk.net/derivatives/interest-rate-derivatives/2444629/non-parametric-local-volatility-formula-interest-rate
http://www.risk.net/derivatives/interest-rate-derivatives/2444629/non-parametric-local-volatility-formula-interest-rateTue, 02 Feb 2016 16:02:00 +0000Corporates warn of legal risk in Euribor transitionProposed new methodology behind benchmark constitutes a "fundamental" change, ACT argues http://www.risk.net/derivatives/2444407/corporates-warn-legal-risk-euribor-transition
http://www.risk.net/derivatives/2444407/corporates-warn-legal-risk-euribor-transitionTue, 02 Feb 2016 13:54:00 +0000Slow start to US dollar rates clearing in JapanDealers cite limited demand to clear foreign currency interest rate swaps at JSCC as reason for slow volumes, with two trades cleared in four months http://www.risk.net/derivatives/interest-rate-derivatives/2444277/slow-start-us-dollar-rates-clearing-japan
http://www.risk.net/derivatives/interest-rate-derivatives/2444277/slow-start-us-dollar-rates-clearing-japanMon, 01 Feb 2016 00:30:00 +0000Eonia ‘almost meaningless’, says Eurex Volumes in Europe’s unsecured overnight lending markets are now frequently too small to generate a meaningful Eonia fixing, Eurex argues. The debate is significant in the context of the post-Libor search for an alternative fixing that could serve as the reference rate for trillions of euros worth of rates contracts – a debate Eurex has a strong interest in http://www.risk.net/derivatives/interest-rate-derivatives/2443686/eonia-almost-meaningless-says-eurex
http://www.risk.net/derivatives/interest-rate-derivatives/2443686/eonia-almost-meaningless-says-eurexThu, 28 Jan 2016 09:05:00 +0000JSE swap futures off to a slow startSeven weeks after their launch, South Africa's interest rate swap futures contracts are yet to trade. Dealers say they are struggling with CVA calculations and internal approval processes http://www.risk.net/derivatives/interest-rate-derivatives/2431788/jse-swap-futures-slow-start
http://www.risk.net/derivatives/interest-rate-derivatives/2431788/jse-swap-futures-slow-startMon, 26 Oct 2015 08:00:00 +0000LDI funds cool on zero-coupon swaps as price jumpsPension funds say the cost of their traditional zero-coupon interest rate swaps surged six-fold this year, as the return of interest rate volatility exposed hidden basis risks in dealers’ books http://www.risk.net/derivatives/interest-rate-derivatives/2427731/ldi-funds-cool-zero-coupon-swaps-price-jumps
http://www.risk.net/derivatives/interest-rate-derivatives/2427731/ldi-funds-cool-zero-coupon-swaps-price-jumpsThu, 08 Oct 2015 23:00:00 +0000Client list reveals HFT dominance on BrokerTecBarclays and JP Morgan are the only banks on a list of top interdealer firms for US Treasuries http://www.risk.net/derivatives/interest-rate-derivatives/2426923/client-list-reveals-hft-dominance-brokertec
http://www.risk.net/derivatives/interest-rate-derivatives/2426923/client-list-reveals-hft-dominance-brokertecTue, 22 Sep 2015 23:17:00 +0000Competition is saving end-users from euro swaps price hikesSwap dealers are often described as a cartel; right now, they are not acting like one http://www.risk.net/derivatives/interest-rate-derivatives/2424766/competition-saving-end-users-euro-swaps-price-hikes
http://www.risk.net/derivatives/interest-rate-derivatives/2424766/competition-saving-end-users-euro-swaps-price-hikesFri, 11 Sep 2015 08:30:00 +0000Cutting Edge introduction: Sticky SABRNegative interest rates are tricky to model accurately, but quants at Numerix have developed a technique to better capture their dynamics, without the hassle involved in using shifted models http://www.risk.net/derivatives/interest-rate-derivatives/2424849/cutting-edge-introduction-sticky-sabr
http://www.risk.net/derivatives/interest-rate-derivatives/2424849/cutting-edge-introduction-sticky-sabrThu, 10 Sep 2015 11:12:00 +0000Hidden price pressures grow in euro swap marketUsers of euro interest rate swaps should expect bid/offer spreads to widen, dealers are warning –
a consequence of shrinking liquidity in the markets banks use to hedge, such as the Bund future. Fierce competition and a drive to internalise more flow has shielded clients so far http://www.risk.net/derivatives/interest-rate-derivatives/2424383/hidden-price-pressures-grow-euro-swap-market
http://www.risk.net/derivatives/interest-rate-derivatives/2424383/hidden-price-pressures-grow-euro-swap-marketTue, 08 Sep 2015 03:00:00 +0000CME guaranty fund cut could lure new clearing membersRegional banks and prop shops are eyeing direct membership, but the lower minimum guaranty fund contribution does little for existing FCMs http://www.risk.net/infrastructure/clearing/2424369/cme-guaranty-fund-cut-could-lure-new-clearing-members
http://www.risk.net/infrastructure/clearing/2424369/cme-guaranty-fund-cut-could-lure-new-clearing-membersThu, 03 Sep 2015 08:38:00 +0000The free boundary SABR: natural extension to negative ratesIn the current low interest rate environment, extending option models to negative rates has become an important issue. Here, Alexandre Antonov, Michael Konikov and Michael Spector extend the widely used SABR model to the free boundary SABR model that can handle negative rates. They derive an exact option pricing formula for the zero correlation case, and a suitable approximation for the general case. The analytical results are successfully compared with the Monte Carlo simulations http://www.risk.net/derivatives/interest-rate-derivatives/2423287/free-boundary-sabr-natural-extension-negative-rates
http://www.risk.net/derivatives/interest-rate-derivatives/2423287/free-boundary-sabr-natural-extension-negative-ratesTue, 25 Aug 2015 14:16:00 +0000CCPs confront cleared swap basis threatIn theory, a price difference could emerge for any derivative that is cleared at two or more clearing houses – as recently happened for US dollar swaps at CME and LCH.Clearnet. From Japan to Mexico, other clearers explain how they are trying to avoid it http://www.risk.net/derivatives/interest-rate-derivatives/2416975/ccps-confront-cleared-swap-basis-threat
http://www.risk.net/derivatives/interest-rate-derivatives/2416975/ccps-confront-cleared-swap-basis-threatMon, 10 Aug 2015 03:00:00 +0000CCP basis market takes off – but will buy-side join in?Over the past three months, it has been more expensive to trade a pay-fixed US dollar swap that will clear at CME than at rival LCH.Clearnet, resulting in a surge in volumes and volatility for so-called basis trades. Now, banks are trying to get buy-side firms involved http://www.risk.net/derivatives/interest-rate-derivatives/2420724/ccp-basis-market-takes-will-buy-side-join
http://www.risk.net/derivatives/interest-rate-derivatives/2420724/ccp-basis-market-takes-will-buy-side-joinFri, 07 Aug 2015 05:41:00 +0000Banks and pension funds fall out over bond CSAsFor so long the darling of dealer derivatives desks, pension funds’ refusal to post cash collateral means banks are introducing new charges, and some are rethinking the relationship altogether http://www.risk.net/derivatives/interest-rate-derivatives/2411660/banks-and-pension-funds-fall-out-over-bond-csas
http://www.risk.net/derivatives/interest-rate-derivatives/2411660/banks-and-pension-funds-fall-out-over-bond-csasThu, 11 Jun 2015 05:20:00 +0000CME-LCH basis affecting choice of venue, say buy-sidersPrice difference is now "material", warns Pimco's De Leon http://www.risk.net/derivatives/interest-rate-derivatives/2409396/cme-lch-basis-affecting-choice-venue-say-buy-siders
http://www.risk.net/derivatives/interest-rate-derivatives/2409396/cme-lch-basis-affecting-choice-venue-say-buy-sidersThu, 21 May 2015 06:16:00 +0000Bank swap books suffer as CME-LCH basis explodesA 13-fold increase in the relative cost of clearing interest rate swaps at CME instead of LCH.Clearnet is estimated to have cost dealers $20 million each. It may also reduce client flows into CME http://www.risk.net/derivatives/interest-rate-derivatives/2408764/bank-swap-books-suffer-cme-lch-basis-explodes
http://www.risk.net/derivatives/interest-rate-derivatives/2408764/bank-swap-books-suffer-cme-lch-basis-explodesFri, 15 May 2015 11:46:00 +0000CME has “no plans” to corner invoice spread marketDealers still worried exchange has motive and means to create monopoly http://www.risk.net/derivatives/interest-rate-derivatives/2402367/cme-has-no-plans-corner-invoice-spread-market
http://www.risk.net/derivatives/interest-rate-derivatives/2402367/cme-has-no-plans-corner-invoice-spread-marketSun, 05 Apr 2015 23:05:00 +0000Profile: Citadel's Hamill on the fight for swaps market shareThe arrival of swap execution facilities was supposed to herald a new era of swap market competition. Citadel Securities was the first new entrant to take the challenge, and its fixed-income execution head talks here about how the firm is trying to make its mark http://www.risk.net/derivatives/interest-rate-derivatives/2400949/profile-citadels-hamill-fight-swaps-market-share
http://www.risk.net/derivatives/interest-rate-derivatives/2400949/profile-citadels-hamill-fight-swaps-market-shareMon, 30 Mar 2015 05:00:00 +0000Goodbye Sonia flat: banks rethink swaps with bond collateralBarclays, Citi, HSBC and Lloyds Bank are among dealers now adding an extra spread when discounting bond-collateralised swaps – which eats into the profits pension funds can see. Funds do not like the change but privately agree banks have a point http://www.risk.net/derivatives/interest-rate-derivatives/2398048/goodbye-sonia-flat-banks-rethink-swaps-bond
http://www.risk.net/derivatives/interest-rate-derivatives/2398048/goodbye-sonia-flat-banks-rethink-swaps-bondThu, 05 Mar 2015 09:24:00 +0000Interest rate derivatives house of the year: Deutsche BankElectronic trading, compression, swap book consolidation – efficiency was the watchword for Deutsche Bank’s rates business last year, but it supported a roaring trade in cross-currency swaps http://www.risk.net/derivatives/interest-rate-derivatives/2387346/interest-rate-derivatives-house-year-deutsche-bank
http://www.risk.net/derivatives/interest-rate-derivatives/2387346/interest-rate-derivatives-house-year-deutsche-bankMon, 12 Jan 2015 16:16:00 +0000Short-rate joint-measure modelsJohn Hull, Alexander Sokol and Alan White introduce a new concept, called local price of risk, to construct and calibrate a joint-measure model describing the evolution of interest rates under both the real-world and risk-neutral measures. This can be used for a variety of risk management applications http://www.risk.net/derivatives/interest-rate-derivatives/2372197/short-rate-joint-measure-models
http://www.risk.net/derivatives/interest-rate-derivatives/2372197/short-rate-joint-measure-modelsFri, 26 Sep 2014 12:14:00 +0000CME swaptions clearing ready for November launchSwaptions clearing members at CME must submit daily valuation data to the CCP or face hefty fines http://www.risk.net/derivatives/interest-rate-derivatives/2370963/cme-swaptions-clearing-ready-november-launch
http://www.risk.net/derivatives/interest-rate-derivatives/2370963/cme-swaptions-clearing-ready-november-launchMon, 22 Sep 2014 09:14:00 +0000Forward-starting swap volumes fail to surge, says IsdaData refutes claims that market is using forward-starting trades to avoid Sefs, says industry body http://www.risk.net/derivatives/interest-rate-derivatives/2364307/forward-starting-swap-volumes-fail-surge-says-isda
http://www.risk.net/derivatives/interest-rate-derivatives/2364307/forward-starting-swap-volumes-fail-surge-says-isdaWed, 10 Sep 2014 12:59:31 +0000OIS rate change easy to absorb, says Isda's O'ConnorIsda chair Stephen O'Connor believes the US Federal Reserve's desire to change the OIS reference rate from Fed funds to the general collateral repo rate will be "easily" absorbed into the market http://www.risk.net/derivatives/interest-rate-derivatives/2364433/ois-rate-change-easy-absorb-says-isdas-oconnor
http://www.risk.net/derivatives/interest-rate-derivatives/2364433/ois-rate-change-easy-absorb-says-isdas-oconnorWed, 10 Sep 2014 11:02:00 +0000Taiwan fixing could fragment offshore renminbi liquidityLatest CNH fixing will be a boon for Taiwan’s derivatives market, but concerns have emerged over the potential silo-isation of the renminbi market
http://www.risk.net/foreign-exchange/2362487/taiwan-fixing-could-fragment-offshore-renminbi-liquidity
http://www.risk.net/foreign-exchange/2362487/taiwan-fixing-could-fragment-offshore-renminbi-liquidityMon, 01 Sep 2014 00:00:00 +0000Central banks ready to break swap market's Libor habitPolicy-makers are not content to leave the interest rate derivatives market anchored to Libor and its family of benchmarks, preferring the idea of a multi-rate world. But getting from here to there will require the market to be pushed, and could also fragment liquidity. Joe Rennison reports http://www.risk.net/derivatives/interest-rate-derivatives/2362168/central-banks-ready-break-swap-markets-libor-habit
http://www.risk.net/derivatives/interest-rate-derivatives/2362168/central-banks-ready-break-swap-markets-libor-habitSun, 31 Aug 2014 23:10:00 +0000Powell says Fed will ‘make sure’ swap market can ditch LiborCentral banks want to break the swap market's reliance on Libor, but the planned risk-free alternatives will have to be liquid. The Fed expects to play a coordinating role http://www.risk.net/derivatives/interest-rate-derivatives/2362170/powell-says-fed-will-make-sure-swap-market-can-ditch
http://www.risk.net/derivatives/interest-rate-derivatives/2362170/powell-says-fed-will-make-sure-swap-market-can-ditchThu, 28 Aug 2014 08:59:00 +0000FSB says swaps users to be pushed away from LiborDerivatives market participants may have to be pushed into a new, multi-benchmark world, says FSB in Libor reform recommendations http://www.risk.net/derivatives/interest-rate-derivatives/2356693/fsb-says-swaps-users-be-pushed-away-libor
http://www.risk.net/derivatives/interest-rate-derivatives/2356693/fsb-says-swaps-users-be-pushed-away-liborWed, 23 Jul 2014 00:51:00 +0000KRX adds 16 foreign branches for mandated won IRS clearingKorea Exchange signs up 16 foreign bank branches for its IRS clearing service prior to June 30 deadline from its local regulator, while CFTC expected to announce no-action relief for KRX http://www.risk.net/infrastructure/clearing/2352192/krx-adds-16-foreign-branches-mandated-won-irs-clearing
http://www.risk.net/infrastructure/clearing/2352192/krx-adds-16-foreign-branches-mandated-won-irs-clearingThu, 26 Jun 2014 12:04:00 +0000India relaxes interest rate derivatives limits for insurersIndian insurers can now use interest rate derivatives of over one year to hedge exposures but CSAs will be required to transact, according to updated guidelines from the regulator http://www.risk.net/derivatives/interest-rate-derivatives/2350715/india-relaxes-interest-rate-derivatives-limits
http://www.risk.net/derivatives/interest-rate-derivatives/2350715/india-relaxes-interest-rate-derivatives-limitsThu, 19 Jun 2014 08:54:00 +0000Swap futures no threat to brokers – Icap Sef chiefPaulhac says CME swap future is not a vehicle for interdealer risk transfer. Others claim some market participants have replaced swap portfolios with the new contracts http://www.risk.net/derivatives/interest-rate-derivatives/2349820/swap-futures-no-threat-brokers-icap-sef-chief
http://www.risk.net/derivatives/interest-rate-derivatives/2349820/swap-futures-no-threat-brokers-icap-sef-chiefFri, 13 Jun 2014 09:04:00 +0000