Interest Rate Risk Modelling in Transformation
A special issue of Risks (ISSN 2227-9091).
Deadline for manuscript submissions: closed (20 January 2020) | Viewed by 12677
Special Issue Editor
Interests: derivative securities pricing; term structure of interest rates; model risk; quantitative finance techniques; credit risk modelling; computational finance
Special Issue Information
Dear Colleagues,
The modelling of interest rate risk has been undergoing considerable transformation for some time now. However, on many issues, a settled consensus (among practitioners and academics alike) has yet to emerge, and new challenges continue to arise. An example of the former are the basis spreads observed in floating-for-floating swaps, be they in a single currency with two payment legs of different frequencies (also known as the tenor basis) or across two different currencies (the cross-currency basis). An example of the latter are the problems arising from the imminent abolition of LIBOR and similar rates in other jurisdictions, and their replacement by benchmarks calculated in a substantially different manner. Very often, these issues are linked—for example, the spread between LIBOR and OIS (overnight index swaps) could be seen as an extreme example of a tenor basis (where the shorter frequency is daily).
This Special Issue aims to compile high-quality papers that offer a discussion of the state-of-the-art or introduce new theoretical, empirical or practical developments in this area. Topics for this Special Issue include but are not limited to the following:
- Theoretical modelling and empirical analysis of the tenor basis or the cross-currency basis. This includes any research dealing with these “multicurve” phenomena, e.g., their theoretical causes, implications for derivative pricing, and empirical studies;
- Theoretical and practical issues arising from the abolition and replacement of LIBOR and related benchmarks;
- Modelling interest rate risk when valuation adjustments (XVA) are required, e.g., FVA (funding valuation adjustment), MVA (margin valuation adjustment), KVA (capital valuation adjustment);
- Quantifying model risk (i.e., the risk that the model is wrong) in interest rate term structure models.
Guest Editor
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Keywords
- Interest rates
- Interest rate derivatives
- Tenor basis
- Cross-currency basis
- LIBOR replacement
- LIBOR/OIS spread
- XVA
- Interest rate model risk
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