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A Survey on Modeling and Analysis of Basis Spreads

In: Recent Advances In Financial Engineering 2011

Author

Listed:
  • Masaaki Fujii

    (Faculty of Economics, The University of Tokyo, 7-3-1, Hongo, Bunkyo-ku, Tokyo 113-0033, Japan)

  • Akihiko Takahashi

    (Faculty of Economics, The University of Tokyo, 7-3-1, Hongo, Bunkyo-ku, Tokyo 113-0033, Japan)

Abstract

The recent financial crisis has spiked the credit and liquidity premia among financial products, and significant widening of basis spreads among Libors with different tenors and currencies has been observed in interest rate markets. Our previous work, "A Note on Construction of Multiple Swap Curves with and without Collateral" has developed an arbitrage-free curve construction method with all the relevant spreads taken into account. This short note carries out a brief survey on the existing analysis of spreads' dynamics and pricing models as a preparation for the development of a model that enables us to price and hedge generic financial derivatives under the new market condition.

Suggested Citation

  • Masaaki Fujii & Akihiko Takahashi, 2012. "A Survey on Modeling and Analysis of Basis Spreads," World Scientific Book Chapters, in: Akihiko Takahashi & Yukio Muromachi & Hidetaka Nakaoka (ed.), Recent Advances In Financial Engineering 2011, chapter 3, pages 43-53, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814407335_0003
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    Cited by:

    1. Alessandro Gnoatto & Nicole Seiffert, 2020. "Cross Currency Valuation and Hedging in the Multiple Curve Framework," Working Papers 03/2020, University of Verona, Department of Economics.

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