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Vol I, Issue 8 December 2013
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Research and Insights
Industry Insights | OIS & FVA Relationship: Evolution of OTC Derivative Funding Dynamics This paper, written by Satyam Kancharla, Numerix Senior Vice President, explores the basics of OIS discounting and FVA for OTC derivatives—and then dives deeper into the relationship between the two concepts. The whitepaper also includes a case study that highlights the potential impact of FVA on trade profitability. The author concludes that FVA is a real charge that will affect the profitability of trades, and therefore, should impact decision-making about the trade. We come to see why it is imperative to know this cost in order to make the best business decisions. Read more.
Industry Innovations | The Numerix Approach to Funding Value Adjustment for General Financial Instruments While OIS has emerged as the new proxy for the risk-free rate and the standard for collateral discounting, the fact remains that a multitude of funding rates dictated by collateral agreements are utilized across a portfolio. From a quantitative point of view, the inclusion of multiple sources of funding, such as unsecured money market funding, collateral and repo, leads to a nonlinear partial differential equation (PDE) featuring multiple discounting rates. Solving this nonlinear PDE is a difficult numerical problem, which is why disposing of a practical approximate implementation methodology is as important as working on rigorous theoretical foundations. Read more.
Case Study | BlackRock Solutions (BRS) Learn how Numerix provided the depth and breadth of models needed to expand BlackRock Solutions' FX exotic derivatives platform and helped to accelerate the implementation of its FX analytic capabilities. Read Case Study
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Insurance Focus
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