Dealing with funding on uncollateralised swaps

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