The Final Stretch: Outstanding Issues in Non-linear RFR Derivatives
In this Risk.net webinar a panel of industry experts discuss the key issues and challenges market participants face regarding the volatility, valuation, pricing, liquidity and hedging of non-linear derivatives such as options, caps and floors.
The transition away from Libor has been relatively smooth. Six months on from Libor cessation, cash and derivatives markets have adapted quickly to the new multi-rate world. In the US, where selected USD Libor tenors will remain until mid-2023, SOFR is firmly established as the preferred alternative for derivatives.
However, one area of the market remains resistant to change. Non-linear derivatives – such as options, caps and floors – are poorly suited to backward-looking benchmarks such as SOFR, and market participants face difficult questions around product structure, volatility, valuation, pricing, liquidity and hedging.
This leaders’ panel explores:
- How the market is adapting to SOFR swaptions
- The products best suited to term SOFR
- Lessons from the latest deals and developments
- The current state of the market: volumes and liquidity in RFR options, caps and floors, and other complex products
- Valuation and pricing hurdles associated with in-arrears rates
- Challenges and developments in modelling volatility in SOFR and overnight rates
Speakers:
Ping Sun, SVP of Financial Engineering, Numerix
Ralph Axel , Director and U.S. Rates Strategist, BofA Global Research
Moderated by:
Helen Bartholomew, Editor-at-large, Emea, Risk.net
