Fixing the Fixings: What Road to a More Representative Money Market Benchmark?

23 Pages Posted: 18 Jun 2013

See all articles by Vincent Brousseau

Vincent Brousseau

European Central Bank, Directorate General Economics

Alexandre Chailloux

International Monetary Fund (IMF)

Alain Durré

European Central Bank (ECB) - Directorate General Economics; IéSEG - Université Catholique de Lille; National Center for Scientific Research - LEM

Date Written: May 2013

Abstract

Interest rate derivatives on major currencies, with notional outstanding amounts adding up to hundreds of trillions, are mostly indexed on Libor and Euribor benchmarks, as are hundreds of billions in loans to enterprises, mortgages and other retail loans to the real economy. Yet, the prevailing role of these benchmarks appears to be more a legacy from history rather than reflecting today?s structure of banks? funding. Building on earlier work (Brousseau, Chailloux, Durré, 2009), this paper discusses various options to move towards a new benchmarking system in the money market. It proposes a more ambitious benchmark design that would consist of a trade-weighted index that would systematically pool all short-term wholesale funding operations of banks per tenor.

Keywords: International capital markets, Money, Interest rates, Libor, Euribor, fixings, Unsecured Money Market, and Benchmarking System., money market, derivative, hedging, interest rate derivatives, financial institutions, discounting, hedge, financial markets, bond, deposit interest, derivatives markets, financial contracts, financial system, money markets, deposit rate, money market funds, derivative contracts, derivative instrument, financial market, term derivatives markets, bond indices, international financial markets, cash flow, government bond, derivatives trading, derivatives transactions, financial futures, interest rate risk, options on futures, financial stability, derivatives market, bo

JEL Classification: G10, G15, E43

Suggested Citation

Brousseau, Vincent and Chailloux, Alexandre Bruno and Durre, Alain C. J., Fixing the Fixings: What Road to a More Representative Money Market Benchmark? (May 2013). IMF Working Paper No. 13/131. Available at SSRN: https://ssrn.com/abstract=2280637

Vincent Brousseau (Contact Author)

European Central Bank, Directorate General Economics ( email )

Kaiserstrasse 29
Frankfurt am Main, 60311
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

Alexandre Bruno Chailloux

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Alain C. J. Durre

European Central Bank (ECB) - Directorate General Economics ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

IéSEG - Université Catholique de Lille ( email )

3, rue de la Digue
F-59800 Lille
France

National Center for Scientific Research - LEM ( email )

106-112 Boulevard de l'Hopital
F- 75647 Paris Cedex 13
France

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