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Interest Rate Modelling in the Multi-curve Framework - LinkedIn Discount

Interest Rate Modelling in the Multi-Curve Framework
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Marc Henrard
May 2014 | Hardback | 9781137374653
264 pages

£42.00 rrp £60.00

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The founding father of the multi-curve framework presents a guide to the new standard in interest rate modelling for quantitative practitioners

Interest rate modelling has undergone significant change in the last five years following the financial crisis. No longer is a single yield curve sufficient in representing real world markets. Instead, practitioners and academics are now using multi-curve frameworks, which more accurately represent current market conditions. A complete review of the models used in academic literature and by practitioners has taken place, and millions of dollars have been spent worldwide on revising basic concepts and redeveloping models and systems in the world's leading banks, hedge funds and insurance companies.

Serving as a practical reference for academics and practitioners alike, this book details all the foundations of this new approach, focusing on recent developments (2007–13) and the impact of multi-curve models. It analyses the impact on the interaction between the curves, how market instruments liquidity and conventions force curves that are a lot more than simply a multiplication of single curves. It then develops the impact of those new building blocks on the more advanced term structure models. In an extended chapter, a unified multi-curve and collateral framework is presented. It also covers the impact on implementation in IT libraries, describing the various issues and providing examples of coherent production-grade library implementation.

Written by one of the founding fathers of the multi-curve framework – experienced practitioner and researcher Marc Henrard – the book is written specifically for practitioners using the framework in banks, hedge funds and clearing houses from a trading, risk management and modelling perspective. With this book in hand, the reader should be able to develop a multi-curve framework in a bank or hedge fund including all the practical aspects.

This is an important and much needed book looking at multiple interest rate curves, including collateralization. The subject is introduced motivating all developments from a historical perspective and is very pleasant to read. Both a rigorous theoretical approach and detailed practical recipes for bootstrapping and interpolation techniques are provided, in a coordinated fashion, using real market products. From one of the originators and protagonists of the recent multiple curves literature, this is an appealing book for a potentially wide audience and is strongly recommended." - Prof Damiano Brigo, Department of Mathematics, Imperial College London, and Director of the Capco Institute, and Dr Andrea Pallavicini, Imperial College London and Head of Equity, FX and Commodities models, Banca IMI


1. Introduction
2. The Multi-Curve Framework Foundations
3. Variation on a Theme
4. Interpolation
5. Curve Calibration
6. More Instruments
7. Options and Spread Modelling
8. Collateral and Funding
Appendix A. Gaussian HJM
Appendix B. Conventions
Appendix C. Implementation in a Library

Author biography

Marc Henrard is Head of Quantitative Research and a member of the Executive Committee at OpenGamma, a risk management technology firm founded in 2009. Marc is also an Honorary Senior Lecturer at University College London where he teaches a course on interest rate modelling. He has over 15 years' experience in finance, including senior positions in risk management, trading, and quantitative research. Prior to joining OpenGamma, Marc was in charge of researching and implementing interest rate models as the Global Head of Interest Rate Modelling for the Dexia Group. Previously he held various management positions at the Bank for International Settlements as Deputy Head of Treasury Risk, Deputy Head of Interest Rate Trading and Head of Quantitative Research. Marc holds a PhD in Mathematics from the University of Louvain, Belgium. Prior to his career in finance he was a research scientist and university lecturer for 8 years.

Marc's research focuses on interest rate modelling and risk management. He publishes on a regular basis in international finance journals and is a regular speaker at practitioner and academic conferences.