Fixing the Fixings: What Road to a More Representative Money Market Benchmark?
23 Pages Posted: 18 Jun 2013
Date Written: May 2013
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: Suggested Citation