The Irony in the Derivatives Discounting Part II: The Crisis

Wilmott Journal, Vol. 2, pp. 301-316, 2010

Posted: 28 Sep 2011

See all articles by Marc P. A. Henrard

Marc P. A. Henrard

muRisQ Advisory; OpenGamma; University College London - Department of Mathematics

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2010

Abstract

Libor derivative pricing has changed with the crisis; Libor is no longer one unambiguous curve as a large basis has appeared between different Libor tenors. A previous approach to derivative discounting is reviewed in 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 (January 1, 2010). Wilmott Journal, Vol. 2, pp. 301-316, 2010. Available at SSRN: https://ssrn.com/abstract=1934847

Marc P. A. Henrard (Contact Author)

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OpenGamma ( email )

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University College London - Department of Mathematics ( email )

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