Stabsseminar med Sundaresan

Suresh Sundaresan fra Columbia University holder foredrag på stabsseminar ved Institutt for foretaksøkonomi fredag 18. oktober.

17.10.2002 - Anette W. Petersen

Tema: Collateralazing Swaps: Implications for Valuation, Zero Extraction and Derivatives Pricing

Tid: Fredag 18. oktober, kl. 12.15-13.30
Sted: Aud. 11

Abstract:
Swap pricing theory traditionally views swaps as portfolios of forward contracts. This intuition breaks down when swaps are marked-to-market and collateralized to mitigate credit exposure which is current market practice. Marking-tomarket improves recovery rates and hence affects the default-adjusted rates used to discount swap cash flows. Marking-to-market also results in intermediate cash-flows and it is costly to post collatera. We show that collateralized swap rates differ from those obtained by viewing swaps as portfolio of forward contracts. Ignoring collateralization introduces significant biases in swap rates, especially for long dated swaps.

Paper er tilgjengelig på instituttets hjemmeside.

Kontaktperson: Hans K. Hvide (59283).