OIS discounting, Clearing house of the year and LINKS Risk Advisory

Read more: http://www.risk.net/risk-magazine/feature/1932795/clearing-house-lchclearnet#ixzz1E9kHjGTO

LCH Clearnet very deservedly won Clearing House of the Year 2010 at the Risk awards. One key reason cited by Risk magazine for the award was LCH's conversion in mid 2010 to OIS discounting on its IRS valuation methodology.

The 'industry consultation' cited in the above article was conducted by LINKS Risk Advisory. In fact, LINKS Risk Advisory was advising OIS discounting was coming to the derivatives market over 3 years ago.

The cutting edge never stops moving: OIS discounting, having revolutionised interest rate swap valuation, is now causing a wholesale rethink of how currency derivatives are valued as well as how CSA's will be drafted in the future. Issues like these can have a major impact on a derivative's value and any trader of derivatives, buy or sell side, would do well to understand the impact of these issues thoroughly to eliminate the risk of arbitrage. Furthermore, considering the implications of Dodd-Frank, these issues will continue to impact buy and sell side derivative users for a while to come.

Happy hunting,
Andy