CCP discounting big bang: convexity adjustment

The collateral transition to SOFR will create convexity adjustments that need to be modelled

CLICK HERE TO DOWNLOAD THE PDF

Central counterparties are planning big bang-like collateral transitions. The transitions are done in an illiquid market and some fair market values are unknown. The CCP-selected mechanism to deal with these unknowns gives rise to exotic convexity adjustments. In this paper, Marc Henrard analyses the origin of those adjustments and quantifies the resulting impact based on a model for the dynamics of the relevant discounting and forwarding rates

Central

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: