Clarus Financial Technology

I am surprised to be writing this (again!) – there are new all time highs in volumes traded!

Following on from the first article on Target Redemption Forwards (see Handling the complexities), my colleagues Serena Manti and Gianluca Molteni have written an interesting article on pricing using the Dupire local volatility model as the path dependent features of these products means that the standard Balck Scholes model with it constatnt volatility assumption is not appropriate.

Clearing Houses have published their latest CPMI- IOSCO Quantitative Disclosures:

Open Interest of €STR futures has continued to increase: Open Interest is over €800bn, up from ~€50bn at the beginning of the year. €STR Futures are becoming a more significant portion of trading activity, accounting for 13% of traded volumes.

In swap markets, pre-hedging describes a dealer taking on risk in anticipation of a possible incoming transaction. There are certain situations where pre-hedging is an allowable “best practice”. This includes when the pre-hedging is disclosed to the client, is intended to result in benefits to the client (as opposed to the dealer) and is consistent with non-manipulative market practices.

60-70-30 are the three numbers you need to know for RFR Trading now. 60% is the percentage of global trading that takes place against RFRs. 70% is the amount of the USD market that trades versus SOFR, down from 80% in Q2.

SEF volumes are also benefitting from this increase in activity.

We will follow what is trading in Interest Rate Derivatives markets across the election, with the latest post at the top of the blog.

This blog covers USD Options markets in Q3 – so please note that is before the election result! This is the latest in a series of blogs covering Swaptions:

Conversion to the MXN RFR (F-TIIE) has commenced at CME. This has kick-started MXN OIS trading, with over 80% of swaps now reported versus F-TIIE.