LIBOR transition: new risk-free rates models and their use for derivative pricing

In 2017, following manipulation episodes and post-crisis issues, the Financial Conduct Authority has announced that markets will be transitioning away from LIBOR starting 2021. This has led jurisdictions to the selection of alternative new risk-free rates (RFRs), which should be more reliable since they are anchored to effective market transactions and do not derive from the quotes of a panel of banks (as their predecessor). This thesis analyses the characteristics of these new rates and proposes some possible solutions for modeling them. It also suggests a way to use one of this models (Hull-White model) to obtain pricing formulas for a particular type of derivatives, namely options on RFRs futures. Moreover, it provides a numerical sensitivity analysis studying how option prices vary with respect to some Hull-White model’s parameters.