In this technical paper, Dr. Mark Gibbs, Chief Software Architect and Dr. Russell Goyder, Director of Quantitative Research, provide an in-depth look at the ideas that form the basis of modern curve-building and the challenges that brought about the need for change.
The credit crisis of 2008 and its aftermath have eclipsed all other influences on curve-building in the last decade. The limitations of LIBOR as a proxy for borrowing costs became apparent and the market has shifted to OIS as a result. In addition, counterparty exposure and the use of collateral agreements and central clearing to reduce or eliminate it has come into sharp focus.
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Adapt to the growing complexity of curve-building
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