Yield curve construction in post-crisis environment

Tenor basis swaps, Cross currency basis swaps, Libor OIS

Course objectives

  • Understand the changing market conditions and parameters involved in swaps pricing
  • Understand the use of OIS, cross Currency Basis Swaps and Tenor Basis Swaps
  • Master the valuation of derivatives with projection curves and multiple discounts

'Classic' bootstrap

  • Classical construction of the swaps curve (discount curve = projection curve)
  • Use for the pricing and risk management of structured swaps
  • Why does this not work anymore : explosion of tenor basis swaps levels, Libor OIs spreads and cross-currency swaps

Excel Case Study

Tenor basis swaps

  • Principle and use
  • Incorporation in pricing : multiple projection curves

Excel Case Study

Cross-currency basis swaps

  • Principle and use
  • 'Traditional' and new drivers
  • Discount curves adjusted for cross-currency swaps

Excel Case Study

OIS swaps

  • Principle and curve construction
  • Use as a discount curve ?

Excel Case Study

Patrice Robin

Patrice Robin

Patrice is an independent consultant on derivatives. Previously, Patrice spent 10 years in trading on interest rate derivatives, then structured products, swaps and vanilla options and became head of interest rate and inflation options in Santander Global Markets in London.

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