book

SOFR Futures and Options

Name: SOFR Futures and Options
ISBN: 9781119888949

by Christian Schaller, Doug Huggins, Galen Burghardt

September 2022

Intermediate to advanced

256 pages

7h 4m

English

Wiley

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Cover
Title Page
Copyright
Foreword
A LITTLE BIT OF HISTORYA REVOLUTION IN FINANCEALL THE BEST
Introduction
EURODOLLARSEURODOLLAR FUTURESLIBORTHE GREAT FINANCIAL CRISISTHE LIBOR RIGGING SCANDALSOFR AND REPO MARKETSSOFR FUTURES AND OPTIONS: TOPICS AND STRUCTURE OF THIS BOOKIMPLICATIONS OF SOFR FOR MARKET ANALYSISREMAINING HURDLES IN THE TRANSITION FROM LIBOR TO SOFRTHE TRANSITION CONTINUESNOTES
SECTION ONE: Concepts
CHAPTER 1: SOFR
THE REPO MARKETSOFR: DEFINITIONS AND FEATURESCALCULATING A REFERENCE REPO RATEORIGIN OF REPO RATES USED FOR SOFR CALCULATIONSOFR VERSUS FED FUNDSSOFR SPIKES AND THE SRFBENEFITS AND (POTENTIAL) PROBLEMS OF SOFRNOTES
CHAPTER 2: SOFR Futures
3M SOFR FUTURES: CONVENTIONS3M SOFR FUTURES AS MARKET PRICES FOR CONSECUTIVE 3M FORWARD SOFR3M SOFR FUTURES: STRIPS3M SOFR FUTURES: ROLLS1M SOFR FUTURES: CONVENTIONS1M VERSUS 3M SOFR FUTURES1M AND 3M SOFR FUTURES: LIQUIDITY1M AND 3M SOFR FUTURES: ASSESSING THE EFFECT OF FOMC MEETINGSPRICING AND HEDGING WITH SOFR FUTURES: GENERAL CONSIDERATIONSEFFECT OF PROCESS SELECTION ON THE PRICING OF SOFR FUTURESEXAMPLE FOR HEDGING A SOFR TERM RATE WITH SOFR FUTURES VIA A JUMP PROCESSNOTES
CHAPTER 3: SOFR Lending Markets and the Term Rate
CONVENTIONS OF SOFR-BASED LENDING MARKETSSTATUS OF SOFR-BASED LENDING MARKETSSIMPLE AVERAGING VERSUS DAILY COMPOUNDINGTHE SOFR INDEXTERM RATETHE MODEL TRANSLATING SOFR FUTURE PRICES IN SOFR TERM RATESCRITICISM OF THE CME TERM RATETWO SCENARIOS FOR THE FURTHER EVOLUTION OF THE TENSION AND HENCE THE TERM RATENOTES
CHAPTER 4: SOFR Spread Futures and the Basis
SOFR FUTURES IN THE STIR UNIVERSEDRIVING FORCES OF SPREADS IN THE STIR UNIVERSECME'S SPREAD CONTRACTSDRIVING FACTORS OF THE SECURED–UNSECURED BASISA MODEL FOR THE SECURED–UNSECURED BASIS, LINKING IT WITH OTHER BASES (CCBS)FIRST APPLICATION OF THIS MODEL: PRICING SPREAD FUTURESSECOND APPLICATION OF THIS MODEL: REPLACING THE CCBS WITH SPREAD FUTURES IN SOME RV TRADESTHIRD APPLICATION OF THIS MODEL: NEW RV RELATIONSHIPTHE CCBS AND THE MODEL AFTER THE END OF LIBORREMAINING PRODUCTS WITH EXPOSURE TO THE BASIS AFTER THE END OF LIBORSWAPS WITH SOFR AS FLOATING LEG AND ASSET SWAPS AFTER THE END OF LIBORHEDGING SOFR-BASED SWAPS AND GOVERNMENT BONDS WITH SOFR FUTURESNOTES

CHAPTER 5: SOFR Future Options
OPTIONS ON 3M SOFR FUTURES: PRODUCT SUITE AND SPECIFICATIONSOVERVIEW OF GENERAL VOLATILITY ANALYSISDISTRIBUTION OF REALIZED VOLATILITY OVER THE SECURED YIELD CURVECURRENT IMPLIED VERSUS HISTORICAL REALIZED VOLATILITYOPTIONS ON SOFR FUTURES VERSUS OPTIONS ON ED FUTURESOPTIONS ON 1M SOFR FUTURES: PRODUCT SUITE AND SPECIFICATIONSOVERVIEW OF AVAILABLE PRICING MODELS FOR ASIAN OPTIONSA POSSIBLE ROAD MAP TOWARD PRICING OPTIONS ON SOFR FUTURES DURING THE REFERENCE PERIODIMPACT OF PROCESS SELECTION ON THE PRICING OF OPTIONS ON SOFR FUTURESNOTES
CHAPTER 6: Pricing Biases and SOFR Curve Building
BIASES IN EURODOLLAR FUTURES PRICESNONLINEARITIES RESULTING FROM CONTRACT DEFINITIONSBIASES IN SOFR FUTURESBUILDING A SOFR SWAP CURVE FROM SOFR FUTURESNOTE
SECTION TWO: Use Cases
CHAPTER 7: Simple Examples of Hedging with SOFR Futures
EXAMPLE 1: CORPORATE TREASURER CONVERTING FLOATING RATE EXPOSURE TO FIXEDEXAMPLE 2: LOCKING IN AN INTEREST RATE WITH MISMATCHED DATESEXAMPLE 3: USING ONE-MONTH SOFR FUTURES AS A HEDGING ALTERNATIVELESSONS TO BE LEARNED FROM THESE THREE SIMPLE EXAMPLESNOTES
CHAPTER 8: Hedging the CME Term SOFR Rate
THE TERM SOFR METHODOLOGYTHE CME TERM SOFR OBJECTIVE FUNCTIONOBTAINING FUTURES PRICES TO USE AS INPUTS TO THE TERM SOFR MODELHEDGING TERM SOFR EXPOSUREA PRECISE APPROACH TO HEDGING CME TERM SOFR EXPOSUREPRACTICAL CONSIDERATIONSNOTES
CHAPTER 9: Hedging Swaps and Bonds with SOFR Futures
TREASURIES VERSUS SOFR FUTURES STRIPSHEDGING SOFR SWAPS WITH SOFR FUTURESHEDGING TREASURIES WITH SOFR FUTURESNOTES
CHAPTER 10: Hedging Caps and Floors with SOFR Futures Options
HEDGING WITH OPTIONS ON 3M SOFR FUTURES BEFORE THEIR REFERENCE QUARTER STARTSMANAGING THE HEDGE DURING THE REFERENCE QUARTERBASIC REPLICATION STRATEGIES OF CAPS AND FLOORS WITH 1M FUTURE OPTIONSDEALING WITH DAILY FLOORSNOTES
Bibliography
Index
End User License Agreement

Overview

SOFR Futures and Options is the practical guide through the maze of the transition from LIBOR. In the first section, it provides an in-depth explanation of the concepts involved:

The repo market and the construction of SOFR
SOFR-based lending markets and the term rate
The secured-unsecured basis
SOFR futures and options and their spread contracts
Margin and convexity

Applying these insights, the second section offers detailed worked-through examples of hedging loans, swaps, bonds, and floors with SOFR futures and options, supported by interactive spreadsheets accessible on the web.

The gold standard resource for professionals working at financial institutions, SOFR Futures and Options also belongs in the libraries of students of finance and business, as well as those preparing for the Chartered Financial Analyst exam.

Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
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