LIBOR Fallback and Quantitative Finance
1
muRisQ Advisory, 8B-1210 Brussels, Belgium
2
University College London, London WC1E 6BT, UK
Risks 2019, 7(3), 88; https://doi.org/10.3390/risks7030088
Received: 19 April 2019 / Revised: 2 August 2019 / Accepted: 5 August 2019 / Published: 15 August 2019
(This article belongs to the Special Issue Interest Rate Risk Modelling in Transformation)
With the expected discontinuation of the LIBOR publication, a robust fallback for related financial instruments is paramount. In recent months, several consultations have taken place on the subject. The results of the first ISDA consultation have been published in November 2018 and a new one just finished at the time of writing. This note describes issues associated to the proposed approaches and potential alternative approaches in the framework and the context of quantitative finance. It evidences a clear lack of details and lack of measurability of the proposed approaches which would not be achievable in practice. It also describes the potential of asymmetrical information between market participants coming from the adjustment spread computation. In the opinion of this author, a fundamental revision of the fallback’s foundations is required.
View Full-Text
Keywords:
LIBOR fallback; derivative pricing; multi-curve framework; collateral; pay-off measurability; value transfer; ISDA consultations
▼
Show Figures
Figure 1
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited
MDPI and ACS Style
Henrard, M.P. LIBOR Fallback and Quantitative Finance. Risks 2019, 7, 88. https://doi.org/10.3390/risks7030088
AMA Style
Henrard MP. LIBOR Fallback and Quantitative Finance. Risks. 2019; 7(3):88. https://doi.org/10.3390/risks7030088
Chicago/Turabian StyleHenrard, Marc P. 2019. "LIBOR Fallback and Quantitative Finance" Risks 7, no. 3: 88. https://doi.org/10.3390/risks7030088
Find Other Styles
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.
