We are pleased to announce a new working paper titled
ERIS futures: Analysis and pricing
is available in our muRisQ Advisory Instrument Anaysis series of research papers. The paper is available on SSRN preprint repository at http://ssrn.com/abstract=5666790.
Abstract
In this note we describe ERIS futures and propose a pricing mechanism for them. Those futures are swap futures associated with OTC cleared swaps. We come to the conclusion that the claim that they ``replicate cash flows of OTC swaps'' is reasonable in the context of the multi-curve framework. Currently their daily price settlement is based on a third party valuation and the futures are not standalone with prices based on actual futures trades. We also analysed the possibility to transform them into standalone instruments with price obtained from recent trade information. For that part, our answer is more prudent and mainly negative in large part due to the lack of liquidity along the curve.
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