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Behind the curve
Most major derivatives dealers now accept that collateralised trades should be discounted using the overnight indexed swap rate, while a bank’s own cost of funding should be used for non-collateralised trades. But change has been much slower in South Africa. Matt Cameron reports
![Behind the curve Behind the curve](/sites/default/files/styles/landscape_750_463/public/import/IMG/042/164042/behind-the-curve-580x358.jpg.webp?itok=gHWvfP0C)
Derivatives markets have grown at breakneck pace over the past 30 years, with hundreds of trillions of dollars in notional now outstanding. So, it may come as a surprise that there’s so much debate about how to value a simple, plain vanilla swap. Since the financial crisis, however, derivatives dealers have had to re-evaluate how they price collateralised and non-collateralised swap transactions – a change that has led to multiple approaches and a lack of comparability between valuations
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