In this roundtable, three leading swaps dealers discuss the changes in derivatives pricing – and in particular, the use of OIS as a discount rate for collateralised derivatives trades.
There have been some significant changes in derivatives pricing since the financial crisis. Dealers are now much more diligent about pricing credit into derivatives, while banks are beginning to price swaps differently depending on whether or not they are collateralised. Previously, Libor was used as a standard discount rate for pricing derivatives trades, but there is growing realisation future cashflows on non-collateralised derivatives transactions should be discounted at the rate at which each bank can borrow. Meanwhile, collateralised trades are being discounted using overnight indexed swaps (OIS).
In this roundtable, three leading swaps dealers discuss the changes in the market - and in particular, the use of OIS as a discount rate for collateralised derivatives.
More on Interest Rate Derivatives
Dealers struggling with CVA pricing and internal approvals
Clients complain of six-fold hike after rates volatility hits dealers' par swap hedges
Barclays and JP Morgan only banks on list of top interdealer firms for US Treasuries
Swap dealers are often described as a cartel; right now, they are not acting like one
Sign up for Risk.net email alerts
Sanjay Sharma talks about risk transparency and how his book helps achieve it.
A five-minute formula from Alexander Denev that takes you through a simple probabilistic graphical model and explains how and why these are used. Find out more about the ground-breaking book, Probabilistic...
Industry leader Vincent Kaminski discusses the challenges faced by energy markets and his new book, Managing Energy Price Risk, 4th Edition.
Momtchil Pojarliev talks about his book, The Role of Currency in Institutional Portolios, currency investing and the potential role of currencies in institutional portfolios.
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.