Discounting [40]

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Bullet points include: In late 2008 UK government debt yields were above corresponding swap rates, particularly overnight indexed swap (OIS) rates Kemp (2009) argues in favour of using OIS swap (or secured) rates as best proxy for risk-free This is also how banks now typically price derivatives Banks are also now much more focused on Credit Valuation Adjustments (CVA) etc. Source: Kemp (2009) and Bloomberg Different Sterling yield curves as at 24 November 2008 GBP Sovereign GBP LIBOR GBP LIBOR Swap GBP OIS (Sonia) Term

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