We present a quantitative study of the markets and models evolution across
the credit crunch crisis. In particular, we focus on the fixed income market
and we analyze the most relevant empirical evidences regarding the divergences
between Libor and OIS rates, the explosion of Basis Swaps spreads, and the
diffusion of collateral agreements and CSA-discounting, in terms of credit and
liquidity effects.
We revisit the problem of pricing and hedging plain vanilla single-currency
interest rate derivatives using multiple distinct yield curves for market
coherent estimation of discount factors and forward rates with different
underlying rate tenors.