Abstract
We present a consistent dynamical approach to justify the market practice of extrapolating different term structures from different instruments. In particular, we include into term structure modelling the impact of credit, collateral and funding risks by extending the risk-neutral pricing framework to incorporate margining procedures and treasury operational models. Numerical examples with multiple-curve models are presented to price interest-rate swaps and tenor basis swaps and to highlight the impact of a dynamical model for the tenor basis in valuation adjustments due to counterparty credit risk and gap risk.
[PDF] Slides of the talk.