Once thought to be impossible, negative interest rates are now common in many European currencies. This presents a challenge for pricing and risk managing some rates derivatives and bonds with models that assume non-negative rate dynamics.
In this webinar, the speakers discuss the context for negative rates and the best approaches to modeling them, including:
- Model requirements for negative rates
- How to build curves in a negative interest rate environment
- Modeling vanilla swaptions: vol cube and shifted SABR, pros and cons
- Modeling rates exotics: shifted LMM, Hull-White, and others, pros and cons