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The Irony in the Derivatives Discounting Part II: The Crisis

Marc P. A. Henrard

OpenGamma; University College London - Department of Mathematics

December 20, 2009

Libor derivative pricing has changed with the crisis; Libor is not anymore one unambiguous curve as a large basis has appeared between different Libor tenors. A previous approach to derivative discounting is reviewed at the light of those changes. The valuation of so called linear derivatives, the yield curve construction and the valuation of vanilla options is analyzed.

Number of Pages in PDF File: 12

Keywords: coherent pricing, interest rate derivative pricing, Libor, multi-curves, discounting, forward, cost of funding, discounting, irony

JEL Classification: G13, E43, C63

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Date posted: July 14, 2009 ; Last revised: December 19, 2009

Suggested Citation

Henrard, Marc P. A., The Irony in the Derivatives Discounting Part II: The Crisis (December 20, 2009). Available at SSRN: http://ssrn.com/abstract=1433022 or http://dx.doi.org/10.2139/ssrn.1433022

Contact Information

Marc P. A. Henrard (Contact Author)
OpenGamma ( email )
185 Park Street
London, SE1 9BL
United Kingdom
University College London - Department of Mathematics ( email )
Gower Street
London, WC1E 6BT
United Kingdom
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