April 25, 2013

Cleared Swap Prices versus Bi-lateral Swaps

Last month, I posted a blog titled "Analysis of Pricing of Cleared and Un-Cleared Swaps from the US DTCC SDR". Today I would like to make a correction in one of the interesting insights I noted in that blog. Namely the point that the "The price differences between UnCleared and Cleared Swaps can be observed and is sizeable" and I went on to note that this was 32 bps (!) for 5Y Swaps, which while surprising, I put down to higher credit risk, capital and funding cost. This is in-fact wrong. Prompted by two things; first enhancements to our DDR view and secondly the recent articles in the press on the error found in an Excel workbook used by Reinhart and Rogoff for a prominent research paper, I decided to re-check this finding. In-fact there is less than 1 basis point difference in prices of USD 5Y Libor 3M Uncleared and Cleared Swaps. For further details of the analysis, click here – Amir K

Most Viewed


Related Articles

July 6, 2022

Data Mistakes Cost Dearly Says the CFTC


AA New OTC Categories

June 30, 2022

SIMM Falls Short says PRA Letter to Banks


Risk Management

June 28, 2022

FMSB Statement of Good Practice on Trading Platform Disclosures