Interest Rates Benchmark Reform and Options Markets

22 Pages Posted: 9 Mar 2020 Last revised: 15 Jul 2020

Date Written: February 14, 2020

Abstract

We examine the impact of interest rates benchmark reform and upcoming Libor transition on options markets. We address various modelling challenges the transition brings. We specifically focus on the impact of the clearing houses' discounting switch on swaptions, and the consequences of Libor transition on Libor-in-arrears swaps, caps, and range accruals as typical representatives of a very wide range of Libor derivatives.

Keywords: interest rates benchmark reform, Libor transition, discounting, swaps, swaptions, caps, Libor-in-arrears, range accruals, interest rates

JEL Classification: C61, G13, G15, G18, G21, C51

Suggested Citation

Piterbarg, Vladimir, Interest Rates Benchmark Reform and Options Markets (February 14, 2020). Available at SSRN: https://ssrn.com/abstract=3537925 or http://dx.doi.org/10.2139/ssrn.3537925

Vladimir Piterbarg (Contact Author)

NatWest Markets ( email )

250 Bishopsgate
London, EC2M 4AA
United Kingdom

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