Timeline for Confusion about Initial Pricing IRS with Dual Curves
Current License: CC BY-SA 4.0
4 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Oct 12, 2022 at 8:58 | comment | added | Kurt G. | Some good links are this and this. | |
| Oct 12, 2022 at 8:57 | comment | added | Kurt G. | You are not missing anything. These formulas hold in an ancient world before the 2007/08 credit crunch where 1m Libor was as as good (meaning riskless) as any other Libor (3m or 6m). Post that crisis banks got anxious and charged spreads on their Libors. To factor this into the formulas an old idea of cross currency swaps was picked up that uses different curves for forecasting and discounting. (This was greatly refined over time). Think this way: keep $C$ fixed and switch to discounting with OIS. Then you will achieve par when you add a spread to LIBOR. | |
| S Oct 11, 2022 at 20:58 | review | First questions | |||
| Oct 12, 2022 at 5:21 | |||||
| S Oct 11, 2022 at 20:58 | history | asked | Sinbad The Sailor | CC BY-SA 4.0 |