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
Higher discount rate can cut payouts to in-the-money clients by millions
Risk Awards 2015: German bank managed to marry efficiency with high margins
A joint-measure model combining Q-measure and P-measure
Service is waiting for CFTC approval; dealers say they will approach with caution
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.