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The Irony in the Derivatives Discounting Part II: The Crisis

12 Pages Posted: 14 Jul 2009 Last revised: 19 Dec 2009

Marc P. A. Henrard

OpenGamma; University College London - Department of Mathematics

Multiple version iconThere are 2 versions of this paper

Date Written: December 20, 2009

Abstract

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.

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

JEL Classification: G13, E43, C63

Suggested Citation

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

Marc P. A. Henrard (Contact Author)

OpenGamma ( email )

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London, EC1V 9DD
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University College London - Department of Mathematics ( email )

Gower Street
London, WC1E 6BT
United Kingdom

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