Interest rate swaps

Two curves, one price

The financial crisis multiplied the yield curves used to price interest rate derivatives, making traditional no arbitrage pricing no longer valid. By taking into account the basis adjustment bootstrapped from market basis swaps and using a foreign…

Two curves, one price

The financial crisis has multiplied the yield curves used to price plain vanilla interest rate derivatives, making classic single-curve no-arbitrage relations and pricing formulas no longer valid. Marco Bianchetti shows that no-arbitrage can be recovered…

Reconsidering the fixed-floating mix

Yield curves for sterling, the euro and the dollar are the steepest they have been for well over a decade, leaving companies with outstanding fixed-rate debt and large amounts of cash on balance sheets facing significant negative carry. Many corporates…

The Thais that bind

The Bank of Thailand relaxed its regulations covering the use of derivatives towards the end of 2009. While retail investors are already allowed to buy structured notes and deposits linked to some foreign variables, the relaxation of rules has provided…

A complex framework

Many Japanese financial institutions now conduct their derivatives business through their securities firms, but there are a number of legal risks in using a securities dealer as a derivatives trading entity, writes Tan Ser Kiat of Denton Wilde Sapte…

Linear, yet attractive, Contour

Banks’ Potential Future Exposure models are at the core of the advanced EAD (Exposure At Default) approach to capital requirements for credit risk considered in the New Basel Capital Accord. Juan Cárdenas, Emmanuel Fruchard and Jean-François Picron look…

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