Negative rates: Dealers struggle to price 0% floors

Central banks are holding down interest rates in an attempt to spur growth, and some parts of the fixed-income markets have entered the weird terrain of negative rates. This is sparking a modelling arms race among dealers, as they seek to build or overhaul models to cope with zero- and negative-strike options. Laurie Carver reports

Corentin Rordorf

A London-based rates strategist at one US bank is recalling an episode from her time at London’s Imperial College, where she took a master’s course in finance five years ago: the professor had just casually mentioned that, of course, the interest rate is necessarily a positive variable, and one student asked why. The rest of the class laughed at what was seen as a stupid question.

No-one is laughing now. Negative rates are often seen in short-term German government bonds, other interest rate

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 or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

You need to sign in to use this feature. If you don’t have a 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