EVENT ARCHIVE: OIS Discounting and Curve Management

On May 31, 2012, Xenomorph and Numerix hosted an informative Wilmott Forum event on OIS Discounting and Curve Management.  

The credit crisis of 2007 brought the usage of LIBOR and LIBOR swap rates for discounting purposes into acute focus, as LIBOR spreads to US Treasury rates dramatically increased from the then typical levels of around 50bp to a peak of 450bp in October 2007. This has led many practitioners to now use Overnight Indexed Swap (OIS) rates as a proxy for risk-free rates in derivatives valuation.

This event discussed the use of OIS discounting and curve management in general, from the point of view of the practitioner, the financial engineer and the systems implementer.

Event Agenda:

OIS Discounting: General Background

Sol Steinberg, Derivative Industry
Systemic Risk Reducer - Central Clearing

Sol Steinberg shared insights into transitioning to OIS discounting including:

• OIS Discounting Motivations and History
• CSA/OIS Harmonisation
• PAI process
• CFTC view
• Markets and disputes

• Watch a webcast of Sol's presentation
• Download the notes

OIS and Its Impact on Modeling, Calibration and Funding of OTC Derivatives

Satyam Kancharla
SVP, Client Solutions Group, Numerix LLC

Satyam Kancharla discussed the technical ramifications to consider when transitioning to OIS Discounting including:

• The motivation behind deterministic spread:
• market standard approach
• a quantitative look at ratios and the instruments required to hedge stochastic spread
• Cross currency swaps with multi-curve
• How to do calibration with the adjusted strike in deterministic spread
• Navigating the split between collateral discounting and funding

• Watch a webcast of Satyam's presentation
• Download the notes

Curve Generation Best Practices

Mark Woodgate
Consultancy Director, Xenomorph Inc.

Mark demonstrated best practice curve definition and generation techniques

• Traditional approaches to curve definitions in systems
• Curves defined as time-varying collections of formulas over time
• Data validation – keeping the curve and the data separate
• Client examples and issues addressed

• Watch a webcast of Mark's presentation
• Download the notes

Speakers

Sol Steinberg is a Vice President of Finance at one of the world’s leading interest swap clearing houses, where he specializes in OTC derivative risk.  Sol also focuses on business strategy, product management, and strategic alliances. He is currently on the New York steering committee of the Professional Risk Managers International Association (PRIMIA) and is also a member of the ISDA-FIA working group for limit checking for central counterparty trade acceptance, working to facilitate instant trade acceptance and mitigating systemic risk taking. He was an invitee to the Premier Financial Risk Conference in North America and Risk Minds 2011, where he spoke about enterprise risk management. Sol has worked on default management model enhancements, and  was part of a group that designed and developed an equitable default management model for  membership. In November of 2011, Sol presented a speech for Risk Magazine on Credit and Market Risk Impacts of Basel III. He is currently involved in financial committees and associations such as the Global Association of Risk Professionals, the New York Society of Security Analysis, and the Chartered Financial Analyst Association.

Satyam Kancharla currently heads the Client Solutions Group at Numerix that is responsible for Product Management, Requirements Gathering and Business Analysis. Prior to this, he has served in various roles in Quantitative Software Development, Financial Engineering and Pre-Sales at Numerix.
Before joining Numerix in New York, he was the CTO for Numerix Japan LLC in Tokyo, heading the Pre-Sales and Financial Engineering teams for Asia. Earlier in his career, Mr. Kancharla also worked with Merrill Lynch and GE Capital in Quantitative Finance and Product Development roles. He holds a MS degree in Applied Statistics and Informatics and a BS in Mathematics and Computers.

Mark Woodgate is the Consultancy Director for Xenomorph Software Incorporated, Xenomorph’s New York Office. Mark specializes in managing customer implementation projects and co-ordinates the technical aspects of Xenomorph’s partner activities in North America. Mark is one of the founder directors of the Company and was originally involved in product development as Assistant Technical Director when Xenomorph was formed in 1995. Prior to joining Xenomorph, Mark worked for Logica plc, working on a variety of large, database-related IT projects for the British Government and the Security Services. In 1988, Mark graduated with Honours in Electrical and Electronic Engineering at Imperial College, University of London.