Derivatives
On any given day, the derivatives market is a busy place. You won’t catch us trying to cover it all. Instead, we’re looking for themes, trends and structural changes that affect the market’s buy-side participants.
Right now, our favourite topics include: Libor reform, structured investments and risk transfer, the search for yield, and new ways of accessing liquidity.
Splits emerge over ‘pre-cessation’ fallback triggers
CCPs say cleared swaps will move to new rates if Libor is no longer representative of markets
The machines are coming for your pricing models
Deep learning is opening up new frontiers in financial engineering and risk management
Deep hedging and the end of the Black-Scholes era
Quants are embracing the idea of ‘model free’ pricing and hedging
Fishing for collateral with neural nets
SocGen quant uses deep learning technique to optimise collateral substitution
LCH plans October 2020 SOFR discounting switch
Cash and basis swaps will reverse value transfer on US dollar derivatives
Basis swaps spike amid US rates chatter
Budgetary wrangling and talk of Fed cuts spark Libor-OIS basis shift
Swaptions face valuation hit on discounting switch
Move to new reference rates could hurt some swaptions holders, while others enjoy “windfall gain”
trueEX to shut swaps trading platform
Would-be disruptor will exit business on July 19, leaving swaps market in hands of incumbents
No forward-looking rates? No problem
A commonly used quant model could be the answer to the replacement of forward-looking Libor
Ahead of the curve: how traders profited from Libor fallbacks
Market second-guesses spread for new risk-free rate, spicing up Libor-Sonia basis market
Libor leaders: Prudential takes SOFR for a test drive
Test trades have allowed US insurer to start getting used to a life without Libor
Libor leaders: how seven firms are tackling the transition
BMO, Prudential, Associated British Ports, LCH and others reveal their plans to move off troubled benchmark
Libor leaders: BMO sets the pace in RFR transition
Early mover switches £10 billion of pension liability swap hedges to Sonia
Local Asian custodians not ready for IM phase five
Banks’ sluggish preparations for initial margin rules could hit buy-side clients
A mystery: why did the NY Fed use a survey to get SOFR?
Almost a week later, still no word on why SOFR was set using a market survey instead of submissions
FCA: Sonia derivatives liquid enough to create term rates
Andrew Bailey says a forward-looking rate can work, but its use should be limited
Sonia advances: liquidity builds as banks eye interdealer shift
Libor’s successor has some solid footholds. Wider acceptance could come as soon as later this year
Banks quiet on Libor legacy transition, say Asian clients
Hong Kong Electric Company and APG Asia say dealer engagement on amending products is limited
JP Morgan turns to machine learning for options hedging
New models sidestep Black-Scholes and could slash hedging costs for some derivatives by up to 80%
Beyond Markowitz with quantum annealing
Venturelli and Kondratyev use quantum annealers to optimise portfolios
Born again: Citi’s forex prime brokerage
After a $180 million gut-punch, the apex brokerage is now evangelising to amused rivals about the perils of mispricing
Prep now for one-day lag in Eonia, market told
Overnight batch calculations will have to run during the day, following change to doomed benchmark
LCH plans major forex clearing expansion
CCP to tackle cash-settled options, deliverable swaps and standalone service for deliverable forwards
Isda’s CDS fix draws murmurs of dissent
Proposed changes don’t go far enough for some; others say it will block legitimate activity