The LIBOR rate is currently scheduled for discontinuation by the end of 2021, and the replacement advocated by regulators in the US is the Secured Overnight Financing Rate (SOFR). The change has the potential to disrupt the \$200 trillion market of derivatives and debt tied to the LIBOR. The...

Applying historical data from the USD LIBOR transition period, we estimate a joint model for SOFR, Fed Funds, and Eurodollar futures rates as well as spot USD LIBOR and term repo rates. The framework endogenously models basis spreads between each of the benchmark rates and allows for the...

As interest rate benchmarks move from LIBOR to overnight Risk-Free Rates (RFR), it has become increasingly important for models to accurately capture the interest rate dynamics at the overnight tenor. Overnight rates closely track central bank policy rate decisions resulting, in highly...

This paper studies the cost structure and pricing efficiency of principal protected notes (PPNs) from the Danish retail market. Our data set consists of detailed information on almost 400 Danish issues of PPNs during the period from 1998 to 2009. Comparing actual offer prices with theoretical...

A new type of structured bond has recently been introduced with enormous success–primarily among private investors–in many countries in Europe. The bonds are medium term and with fixed and very high initial coupons. The remaining coupons are determined as a constant multiplier times the...

We consider the problem of valuation of interest rate derivatives in the post-crisis setup. We develop a multiple-curve model, set in the HJM framework and driven by a L evy process. We proceed with joint calibration to caps and swaptions of different tenors, the calibration to caps guaranteeing...

Interest rate benchmarks are currently undergoing a major transition. The LIBOR benchmark is planned to be discontinued by the end of 2021 and 'replaced' by what ISDA calls an adjusted risk-free rate (RFR). ISDA has recently announced that the LIBOR 'replacement' will most likely be constructed...