As the prolonged negative interest rate environment persists, negative rates continue to be a critically important issue in global finance—impacting some of the most basic calculations and procedures used by the financial community.
1 Financial Times, “Negative Rates to Shake Up Financial System, Say Experts,” March 13, 2015
2 ISDA Collateral Steering Committee Study Group, “ISDA Publishes ISDA 2014 Collateral Agreement Negative Interest Protocol,” May 14, 2014
From a financial modeling perspective, two prominent examples are the quotation of option volatilities and volatility smile interpolation models. Clearly, pricing methodologies must continue to adjust to the unchartered waters of the negative rate phenomenon, and market practices must continually evolve to become more innovative in addressing these challenges.
As a derivative market participant, how could negative interest rates be impacting your business? Read our quantitative research papers and watch our video blog discussions to explore the latest challenges and innovative alternatives for dealing with the impact of prolonged negative rates.