Most derivative market practitioners now use Overnight Index Swap (OIS) curves for their discounting curves when valuing cash-collateralized derivatives. Since the switch to OIS discounting began several years ago and is now standard practice in the industry, the process of building OIS curves must be well understood and extremely accurate by now, right?
Not exactly. While most of the issues related to OIS and dual curve stripping have now been resolved in the industry, some practitioners are discovering issues with the widely used bootstrapping methodologies. Traders of short-dated interest rate derivatives are finding that common bootstrapping approaches may not reflect certain OIS market dynamics very well, and this affects the construction of the short end of the curve – and therefore the pricing and risk calculations on their trades.
In the current low rate environments of the US and other developed markets, these inaccuracies have minimal impact on derivative valuations and hedging – for now. However, when rates start rising due to monetary tightening by central banks, the inaccuracies will become more pronounced.
In this webinar recorded on Tuesday, September 10, 2013, featured speaker Mark Hadley, Vice President of Financial Engineering, discussed ways practitioners can enhance the bootstrapping process for the short end of OIS curves, and how these new approaches will become more important as rates rise.
Mr. Hadley discussed:
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Curve construction basics for the short end of the OIS curve
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Nuances of short term rate dynamics
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Incorporating FOMC dates and seasonality factors into curve construction
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Why this matters in a rising rate environment
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Impact of the new approaches on short-dated interest rate derivatives
To view the on-demand webinar, just register on the right side of this page.
Featured Speakers:
Mark Hadley, FSA, CFA, Vice President, Financial Engineering, Numerix
Mr. Hadley has worked with numerous variable annuity insurers across the industry, whose exposure spans all corners of the globe. He specializes on the capital markets side focusing on financial market modeling, hedge strategy design, and hedge execution.
In his current role with Numerix, he consults with banks, hedge funds, and insurance companies across the globe on how to manage exotic derivative exposure. Prior to Numerix, Mr. Hadley worked with Milliman’s Financial Risk Management group, where he designed and executed several VA and EIA hedging strategies.
Moderator: Jim Jockle, Chief Marketing Officer
Mr. Jockle leads the company's global marketing efforts, spanning a diverse set of solutions and audiences. He oversees integrated marketing communications to customers in the largest global financial markets and to the Numerix partner network through the company's branding, electronic marketing, research, events, public relations, advertising and relationship marketing.
Prior to joining Numerix, he served as Managing Director of Global Marketing and Communications for Fitch Ratings. During his tenure at Fitch, Mr. Jockle built the firm’s public relations program, oversaw investor relations and led marketing and communications plans for several acquisitions. He also oversaw the brand development of a new company dedicated to the enhancement of credit derivative and structured-credit ratings, products and services. Prior to Fitch, Mr. Jockle was a member of the communications team at Moody's Investors Service.
