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Managing swaptions in the face of negative rates – Webinar invitation

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It was once widely believed that zero was the lowest interest rate possible. On face of it, it’s not obvious why anyone would pay to lend someone money. However, despite how counterintuitive they may be, negative interest rates are real.

Since 2014, the European Central Bank has elected to set the Deposit Facility Rate (DFR) lower than zero in – what some may say – is a desperate attempt to stimulate activity. Since then, the finance industry at large has grappled with finding viable ways of dealing with this counterintuitive concept. In many cases, firms have written code under the assumption that negative rates are not attainable. So, now they are finding that their systems are breaking down when hit with negative digits. 

When it comes to handling swaptions specifically, buy and sell sides alike struggle with managing negative rates popping up in their trade environment.  The shifted Stochastic Alpha Beta Rho (SABR) model has emerged as the market standard approach. Shifted SABR helps you model the volatility cube and capture the smile dynamics—giving you the ability to accurately price and hedge derivatives. 

Join us on 30 June for our webinar Mastering Negative Rates where Dr Russell Goyder, Director of Quantitative Research and Development at FINCAD and Hugh Stewart, Research Director at Chartis Research will discuss the context for negative rates and the best approaches to modeling them, including:

  • Model requirements for negative rates
  • How to build curves in a negative interest rate environment
  • Modeling vanilla swaptions: vol cube and shifted SABR, pros and cons
  • Modeling rates exotics: shifted LMM, Hull-White, and others, pros and cons

 Register for this webinar today!

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