Preparing for the Switch to SOFR Discounting
It’s been reported that both LCH SwapClear and CME Clearing will be shifting discounting of US interest rate derivatives to the new U.S. secured overnight financing rate, or SOFR in 2020. Switching from OIS to SOFR discounting will reshape both the cash flow (hence the present value) as well as the risk profile of an instrument, with the specific details being dependent on the trade term. When optionality is present this become even more complex.
For some this switch marks a turning point in the LIBOR transition, however many open questions remain. Understanding the full impact of these changes will be key to understanding the implications for trading and risk management going forward.
In a 1-hour webinar presentation on October 30th at 10 AM EDT, Ping Sun, SVP of Financial Engineering for Numerix explored the many facets of discounting risk as exchanges switch from OIS to SOFR discounting.
Key topics discussed included:
- An update on the status of SOFR and upcoming milestones
- SOFR discounting & financial instruments: from linear products to exotics
- An analysis of SOFR discounting risk of cleared swaps and the proposed compensations by the exchanges
- Market impact of SOFR discounting and what comes next
Featured Speakers
Ping Sun, PhD
Dr. Sun, PhD is Senior Vice President, Financial Engineering at Numerix. He is also product manager of the Numerix CrossAsset analytics platform. During his career at Numerix, Dr. Sun’s work has appeared in number of publications and academic journals, and he has been showcased as a lecturer at a range of academic events and industry conferences. Dr. Sun served as a consultant to Lehman Brothers as a FX / EQ Desk Quant, and his extensive experience includes working to develop the Numerix cross-currency Economic Scenario Generator. He earned a Doctorate Degree in Physics from City College of New York, and a Master’s Degree and Undergraduate Degree in Physics from Fudan University in Shanghai, China.
As Chief Marketing Officer and Executive Vice President of Global Marketing & Corporate Communications, James leads the company’s global marketing and corporate communications efforts, spanning a diverse set of solutions and audiences. He oversees integrated marketing communications to clients in the largest global financial markets and to the Numerix partner network through the company's branding, electronic marketing, research, events, public relations, advertising and relationship marketing.
Since joining Numerix in 2008, James has launched the organization’s award-winning thought leadership program, bringing to light challenges and insights from Numerix market experts. He also hosts the Numerix Video Blog, tackling the challenges pressing the derivatives markets—from regulatory issues to trading strategies.
Prior to joining Numerix, James served as Managing Director of Global Marketing and Communications for Fitch Ratings. During his tenure at Fitch, he built the firm’s public relations program, oversaw investor relations and led marketing and communications plans for several acquisitions. Prior to Fitch, James was a member of the communications team at Moody's Investors Service.
