Marc Henrard - Multi-curve framework

Published a couple of months ago, but I had not seen it before: SFIG answer to ARRC Consultation - New Issuances of LIBOR Securitization . In the answer to Question 5(a) is this paragraph: SFIG believes that for the launch of SOFR as a replacement benchmark for LIBOR to realize its highest potential for universal acceptance, it is essential for ARRC to move forward with its paced transition plan culminating in the development forward - looking term SOFR . We, therefore, recommend that the primary fallback for securities referencing LIBOR be forward - looking term SOFR selected, endorsed or recommended as the replacement for LIBOR by the Federal Reserve Board and/or the NY Fed, or by th e ARRC.  I would write the same for derivatives: I recommend that the primary fallback for derivatives referencing LIBOR be forward - looking term SOFR.

The ICE Swap Rate (formerly ISDAFIX) is a (forward looking) benchmark based in LIBOR-linked swaps synthetic order books. The benchmark is used in CMS-like products and in cash-settled swaptions (EUR, GBP). As their underlying swaps are LIBOR-linked, they will stop to be quoted when LIBOR is discontinued. There is a lot of work done around the LIBOR fallback. I have not heard anything about the planned fallback for those benchmarks. Is there a working group looking at this issue? At ISDA or ARCC/Euro risk-free rate working group level? Don't hesitate to leave details/links about this in the comments.

Why trying to introduce a complex cure for a symptom when there is a simple cure for the disease? This is the question I was asking myself when reading about the Fed and SOFR (repo rate) month-end spikes. The month-end spikes are not a natural economical cycles. They are artificial ones created by the regulators. Balance sheets, liquidity ratios and some other regulatory figures are measured on a monthly or quarterly basis. The quarter ends are becoming important dates for banks. As banks are an important cog in the economy, quarter ends are becoming important for the economy. As a reaction to the (repo) liquidity drying at quarter end, the Fed is proposing some special repo facility to decrease the rate spikes symptoms. But these spikes are totally artificial constructions. Why are the balance sheets still measured only on quarters end only. Nowadays everything in banking seems to be real time and online, from retail payments to complex risk figures like VAR, XVA and IM. Why are balan

Ever since the publication of the ISDA consultation related to IBOR fallback, I have claimed that the approach that ended to be selected, the compounded setting in arrears, was ill-defined and a bad choice for many instruments. My favorite example was the FRA. I choose the FRA because it is a simple liquid instrument where the flaws of the proposal are obvious. Following my notes and seminars on the subject, the market has also noticed the problem. Several articles have been published on the subject in Risk.Net and different market participants have commented on it. If this awareness of the problem by market participants is a good thing, the absence of ISDA comments is worrisome. There are discussion to change the FRAs standard term sheet or to transition to single period swaps instead of FRA. That solution, which was among the possibilities that I mentioned in the past (see for example this blog ), is worth discussing. Nevertheless, the solution proposed seems at the moment attack