Dealing with funding on uncollateralised swaps

risk-cover-story-0710

Derivatives pricing has never been simple, but there were a few constants people used to be able to rely on. One of the most fundamental was the use of Libor as a discount rate to price derivatives trades. The financial crisis has caused this assumption to be thrown out of the window. The majority of banks now recognise that the overnight indexed swap (OIS) rate should be used to discount future cashflows on collateralised swap transactions (Risk March 2009, pages 19–22). Meanwhile, non-collater

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 indvidual account here: