In this session, chaired by Bruno Dupire, Fabio Mercurio will present his current research, followed by several “lightning talks” of 5 minutes each in quick succession. This format gives the audience the opportunity to be exposed to a wider variety of topics.

In this talk, we define and model forward risk-free term rates, which appear in the payoff definition of derivatives, and possibly cash instruments, based on the new interest-rate benchmarks that will be replacing IBORs globally. We show that the classic interest-rate modeling framework can be naturally extended to describe the evolution of both the forward-looking (IBOR-like) and backward-looking (setting-in-arrears) term rates using the same stochastic process. We then introduce an extension of the LIBOR Market Model (LMM) to backward-looking rates. This extension, which we call generalized forward market model (FMM), completes the LMM by providing additional information about the rate dynamics between fixing/payment times, and by implying dynamics of forward rates under the classic money-market measure. Our FMM formulation is based on the concept of extended zero-coupon bonds, which proves to be very convenient when dealing with backward-looking setting-in-arrears rates. Thanks to this, not only the bonds themselves, but also the forwards and swap rates, along with their associated forward measures, can be defined at all times, even those beyond their natural expiries.

• 5:00pm – Check-in
• 5:30pm – Keynote:
  Fabio Mercurio, Ph.D., Global head of Quantitative Analytics, Bloomberg L.P.
• 6:15pm – Lightning talks:
  A lightning talk is a very short presentation lasting only 5 minutes. Several ones will be delivered in a single session by different speakers in quick succession.
• 7:00pm – Cocktail reception

Bloomberg L.P.
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New York, NY 10022
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