Interest Rates Modeling for Russian Markets

The MSc thesis is devoted to study of stochastic modeling of modern Russian financial market, particularly USD LIBOR and MosPrime 3M linear derivatives, known by the swaps name. After Big Financial crisis, new, more complex no-arbitrage pricing theory is required for replicating LIBOR Rates in a presence of basis spreads, which heavily involves CSA and XVA modeling. This work can be seen as a lengthy, but essential introduction to the associated quantitative derivatives modeling by treating both CSA and XVA at their primitive, market-universal level. Following original particles, the focus particularly lies on the cross-currency basis swaps (CCBS pricing) and the interest rate curves calibration routines. Particularly, the theory depiction concludes with a simplest algorithm for Russian market possible which allows unequipped user to extract basis curve for the further stochastic modeling directly from the publicly available Bloomberg data. Related issues such as partial collaterization, as well as providing collateral in different currencies are briefly mentioned, which are considered to be the cutting-edge of the derivatives pricing science.