The Transition from Interbank Offered Rates to Risk-Free Rates: Evolution in Pricing Models for Interest Rate Derivatives

Vincenzo Russo, Frank J. Fabozzi
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引用次数: 0

Abstract

In this article, we review the transition from interbank offered rates (IBORs) to the new risk-free rates (RFRs) introduced as a result of the process for determining IBOR being discontinued. Focusing on the quantitative aspects of the transition, we describe the differences between the forward-looking rates used under the IBOR environment (both single- and dual-curve IBOR environments) and the backward-looking rates used under the RFR one. Furthermore, we analyze the pricing models for interest rate derivatives across such different frameworks: the single-curve IBOR rates environment (in force before the 2007–2009 credit crisis), the dual-curve IBOR rates environment (in force after the 2007–2009 credit crisis), and the new RFR environment (officially introduced starting January 1, 2022). In particular, we describe the evolution of pricing models for the most relevant plain-vanilla interest-rate derivatives: interest rate swaps, overnight indexed swaps, caplets/floorlets, and swaptions.
从银行间同业拆放利率向无风险利率的转变:利率衍生品定价模型的演变
在本文中,我们回顾了从银行间同业拆借利率(IBOR)到新的无风险利率(RFRs)的过渡,这是由于确定银行间同业拆借利率(IBOR)被终止的过程而引入的。我们将重点放在转型的量化方面,描述在IBOR环境下使用的前瞻性利率(包括单曲线和双曲线IBOR环境)与在RFR环境下使用的前瞻性利率之间的差异。此外,我们分析了不同框架下利率衍生品的定价模型:单曲线IBOR利率环境(在2007-2009年信贷危机之前生效)、双曲线IBOR利率环境(在2007-2009年信贷危机之后生效)和新的RFR环境(从2022年1月1日正式引入)。特别是,我们描述了最相关的普通利率衍生品的定价模型的演变:利率掉期、隔夜指数掉期、挂钩/楼面合约和掉期。
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来源期刊
Journal of Fixed Income
Journal of Fixed Income Economics, Econometrics and Finance-Economics and Econometrics
CiteScore
1.10
自引率
0.00%
发文量
23
期刊介绍: The Journal of Fixed Income (JFI) provides sophisticated analytical research and case studies on bond instruments of all types – investment grade, high-yield, municipals, ABSs and MBSs, and structured products like CDOs and credit derivatives. Industry experts offer detailed models and analysis on fixed income structuring, performance tracking, and risk management. JFI keeps you on the front line of fixed income practices by: •Staying current on the cutting edge of fixed income markets •Managing your bond portfolios more efficiently •Evaluating interest rate strategies and manage interest rate risk •Gaining insights into the risk profile of structured products.
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