Multi-Curves Framework with Stochastic Spread: A Coherent Approach to STIR Futures and Their Options

OpenGamma Quantitative Research, No. 11, March 2013

24 Pages Posted: 10 Mar 2013 Last revised: 16 Oct 2013

See all articles by Marc P. A. Henrard

Marc P. A. Henrard

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

Date Written: October 2013

Abstract

The development of the multi-curve framework has mainly concentrated on swaps and related products. By opposition, this contribution focuses on STIR futures and their options. They are analysed in a stochastic multiplicative spread multi-curve framework which allows a simultaneous modelling of the Ibor rates and of the cash-account required for futures with continuous margining. The framework proposes a coherent pricing of futures, swaps, cap/floor, and options on futures. The margined options on futures can be priced by reading the model quantities from the market with almost no calibration. In the final part of the note, we propose the pricing of a financial product which does not exists yet, betting that it will be proposed soon.

Keywords: Multi-curve framework, stochastic spread, STIR futures, options on futures, cap/floor, coherent model, multi-factor HJM

Suggested Citation

Henrard, Marc P. A., Multi-Curves Framework with Stochastic Spread: A Coherent Approach to STIR Futures and Their Options (October 2013). OpenGamma Quantitative Research, No. 11, March 2013. Available at SSRN: https://ssrn.com/abstract=2230545 or http://dx.doi.org/10.2139/ssrn.2230545

Marc P. A. Henrard (Contact Author)

muRisQ Advisory ( email )

Rue du Chemin de fer, 8
Brussels, 1210
Belgium

HOME PAGE: http://murisq.com

OpenGamma ( email )

Albert House
256-260 Old Street
London, EC1V 9DD
United Kingdom

University College London - Department of Mathematics ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
216
Abstract Views
861
rank
139,472
PlumX Metrics