Swaptions
Broker hid yen swaptions basis after trader backlash
Japan’s Totan had been first to show volatility basis; sources speculate traders wanted to avoid re-marking books
US swap rate failed during volatility rout
The Ice swap rate was not published on February 6 due to a lack of electronic prices during equity turmoil
Cash no longer king in European swaptions
Barclays executives explore weaknesses of current pricing formulas for cash-settled swaptions
Euro swaptions market prepares for pricing revamp
Interdealer market to adopt collateralised cash price from July, but some fear impact on legacy books
Clearing conundrum – Forging a solution for the bilateral market
Central clearing has had a beneficial effect on the over‑the‑counter derivatives market, but for some products the road to a cleared model has not been smooth. Capital, operational and margin costs of the non-cleared market have increased, while…
Swaptions expiries complicate portfolio optimisation runs
triBalance and Quantile users call for better post-trade co-ordination between dealers
Industry renews push for triBalance clearing exemption
Dealers using Emir review to request carve-out for optimisation trades
A nonparametric local volatility model for swaptions smile
This paper proposes a nonparametric local volatility Cheyette model and applies it to pricing interest rate swaptions.
Banks turn to synthetic derivatives to cut initial margin
Options-based instruments can halve initial margin for some non-cleared products, say dealers
Bounding Bermudans
Thomas Roos derives model-independent bounds for amortising and accreting Bermudan swaptions
Formosas, the Fed, and the billion-dollar Bermudan trade
Rates options desks on alert as decline in Formosa bond issuance could hit profits and raise US volatility
Monthly swaps data review: Libor dominance challenged
There are more sources of over-the-counter derivatives data available today than at any point in the market’s history
XVA at the exercise boundary
Andrew Green and Chris Kenyon show how the decision to exercise an option is influenced by XVAs
Banks and clients clash over novation MVA charges
Some banks swallowing new margin funding costs, others forcing clients to pay up
Smile with the Gaussian term structure model
This paper presents a natural extension of the LGM that keeps the affine structure and generates an implied volatility smile.
LCH targets non-cleared market with radical new platform
Bilateral trades would be valued and margined using LCH swap curves
Interest rate models enhanced with local volatility
Lingling Cao and Pierre Henry-Labordère implement Dupire's local volatility in interest rate models
Banks prepare for bumpy ride as margin deadline looms
Banks and funds may have limited set of counterparties on September 1
Strength turns to weakness for old OTC market
Non-cleared notional falls $36 trillion as costs and complexity grow
Barclays taps blockchain for equity swaps, options, swaptions
Regulatory capital savings offered by instant settlement of smart contracts on distributed ledgers
Banks save €3.5bn in swaptions compression drive
Capitalab removes €1.3 trillion notional, cutting capital requirements
CME set to launch swaptions clearing in Q2
Uncleared margin rules the driver; may also impact CME-LCH basis
Freddie Mac reviews $600bn hedge book as losses mount
Swap spread inversion contributed to derivatives losses of $2.7 billion in 2015
Non-parametric local volatility formula for interest rate swaptions
Gatarek, Jabłecki and Qu introduce a Dupire-like formula for swaptions