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Interest Rate Modelling in the Multi-curve Framework: Collateral and Regulatory Requirements

Interest rate modelling has changed dramatically since the start of the financial crisis in 2007. Most of the derivative models used in academic literature and by practitioners have had to be reviewed in line with new regulatory requirements. One of the main changes is the mandatory variation margin (VM) regime that came into effect on 1st March 2017, which has established the collateralization of derivatives trades as the de facto standard. No reasonable derivative management and modelling can be done without taking the new dynamic and the regulatory aspects into account. Two frameworks have become the standard: the collateral discounting for the VM and the multi-curve framework for interest rate and, in particular, the differentiation between different underlying curves.

The first part of the programme examines in detail the multi-curve and collateral framework foundations and the curve calibrations, including cross-currency aspects. Once the foundations are in place, the interest rate term structure stochastic modelling has also to be re-examined: the existing models have to be adapted and new versions created to take into account the collateral framework, including the stochastic basis between the different curves.

The course will also provide a perspective on the hidden complexity behind the expected changes to the main interest rate benchmarks and the proposal related to LIBOR fall-back.

Participants will review some of the alternative models and the impact of more advanced models on the pricing of vanilla interest rate products (IRS, OIS, FRA, basis swaps, Futures, swaptions, etc.). Practical workshops and examples use production grade open source code (the code is used by banks, CCPs, hedge funds), which participants can take away for immediate application.

All participants will also receive a copy of Dr Marc Henrard’s book “Interest rate modelling in the multi-curve framework: foundations, evolution, and implementation”.

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  • Date:
  •  4th -  5th November 2019
  • Venue:
  • Cliftons Singapore - The Finexis Building
  • Fee:
  • US$1795 per day

This course is also available in London and New York

This course is FTS-Eligible* and also eligible for 16 CPD hours. GARP & CFA Institute members are eligible for 16 CE/CPD credits. See details

Who The Course is For

  • Quants and Financial Engineers 
  • Structurers
  • Risk Managers
  • Traders
  • Researchers
  • Model validators
  • Regulators

Learning Objectives

  • Valuation under collateral, e.g. OIS discounting
  • Curve calibration
  • Multi-currency collateral discounting
  • Multi-curve stochastic models
  • In-depth valuation of vanilla instruments with collateral; impact of regulation
  • LIBOR discontinuation and new benchmarks impacts

Prior Knowledge

  • Stochastic calculus
  • Understanding of vanilla IR derivatives (IRS, OIS, FRA, Basis swaps)
  • Basic understanding of market infrastructure (collateral, CCP, regulation)
  • Familiarity with Excel
 

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*FTS Eligible
This programme is approved for listing on the Financial Training Scheme (FTS) Programme Directory and is eligible for FTS claims subject to all eligibility criteria being met. Please note that in no way does this represent an endorsement of the quality of the training provider and programme. Participants are advised to assess the suitability of the programme and its relevance to participants' business activities or job roles. The FTS is available to eligible entities, at a 50% funding level of programme fees subject to all eligibility criteria being met. FTS claims may only be made for programmes listed on the FTS Programme Directory with the specified validity period. Please refer to www.ibf.org.sg for more information.