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Webcast: Key Issues in Interest Rate Derivatives Valuation

Speaker: Richard Fedrick

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A course on this topic is available in New York Time Zone, London Time Zone and Singapore Time Zone

Webcast Agenda

  • IBOR transition, why it happened and where we are now
  • CSAs, funding and discounting – understanding modern derivatives valuation
  • Pricing interest rate derivatives in the presence of foreign-currency collateral



1. Given that IR is a major part of derivatives, how would you interpret the fact that we are currently at 2006-2008 levels?
A. I don't think the two things are related.

2.  If you have a 20-year swap, how are you going to get a 20-year repo rate when posted bonds?
A. Any dealer will have a term repo curve. Likely constructed as the SOFR curve + basis.

3.  Does the market assume that FX swaps are USD cash collateralized?
A. In general yes. In (say) Eastern Europe 'no', it will be EUR.

4. Will Europe follow the rest of the world in moving to a single-index system, and if so when do you think this will happen?
A. Probably. But the ECB/regulators have been very vocal in insisting that there are no current plans.

5.  XCCY/USD basis - do we (or should we) think of it as relative to SOFR or Fed Funds?
A. SOFR. The clearing houses have made their decision.

6.  Do FX swaps drive the price of cross-currency basis swaps, or vice versa?
A. FX swaps are the liquid instrument out to 18 months, thereafter it's cross-currency swaps.

Thank you to those attendees who submitted their questions.

LFS offers Interest Rate Derivatives and Swaps, Interest Rate Derivatives 2: Options, and Interest Rate Derivatives 3: Structuring programmes with Richard Fedrick in the London classroom and remotely in London, New York, and Singapore time zones.

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