A Quant Perspective on IBOR Fallback Proposals

Market infrastructure developments analysis, muRisQ Advisory, July 2018

40 Pages Posted: 18 Aug 2018 Last revised: 7 Oct 2018

See all articles by Marc P. A. Henrard

Marc P. A. Henrard

muRisQ Advisory; OpenGamma; University College London - Department of Mathematics

Date Written: July 1, 2018

Abstract

With the increased expectation of some IBORs discontinuation and the increasing regulatory requirements related to benchmarks, a more robust fallback provision for benchmark-linked derivatives is becoming paramount for the interest rate market. Several options for such a fallback have been proposed. This note describes and analyses some of those options. The focus is on the quantitative finance impacts. None of the options that have been proposed fits all of the criteria for a good fallback provision. It appears that some of the options that have gained traction failed even the achievability criterion. The note concludes with the author's personal preference.

Keywords: LIBOR Fallback, Benchmark, Quantitative Finance, Interest Rate

JEL Classification: G13, G15, G18, C51

Suggested Citation

Henrard, Marc P. A., A Quant Perspective on IBOR Fallback Proposals (July 1, 2018). Market infrastructure developments analysis, muRisQ Advisory, July 2018. Available at SSRN: https://ssrn.com/abstract=3226183 or http://dx.doi.org/10.2139/ssrn.3226183

Marc P. A. Henrard (Contact Author)

muRisQ Advisory ( email )

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OpenGamma ( email )

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University College London - Department of Mathematics ( email )

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United Kingdom

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