John Hull: Discount Rates and Funding Value Adjustments in the Valuation of Derivatives

Starts:
4:00 pm on Monday, February 25, 2013
Ends:
5:30 pm on Monday, February 25, 2013
Contact Name:
Drew Quinton
Many banks use LIBOR and LIBOR swap rates as the proxies for the risk-free rate when non-collateralized derivatives transactions are valued and overnight indexed swap (OIS) rates as proxies for the risk-free rate when collateralized transactions are valued. They also make a funding value adjustment to derivatives prices to reflect their average borrowing costs. This presentation will critically examine both of these practices.