LIBOR Fallback and Quantitative Finance
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 fi...
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| Format: | Article |
| Language: | English |
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MDPI AG
2019-08-01
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| Series: | Risks |
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| Online Access: | https://www.mdpi.com/2227-9091/7/3/88 |
| Summary: | 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 <i>lack of details</i> and <i>lack of measurability</i> 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 <i>adjustment spread</i> computation. In the opinion of this author, a fundamental revision of the fallback’s foundations is required. |
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| ISSN: | 2227-9091 |