Wilmott Magazine article: LIBOR: Don't fallback, step forward

One of my recent papers related to the LIBOR fallback has been accepted for publication in Wilmott Magazine
LIBOR: Don't fallback, step forward

The paper will be published in the November 2019 issue. I will present the main results at a CQF Institute seminar on 18 September 2019.

Abstract

There is a general consensus that LIBOR's publication will be discontinued in the coming years. The best preparation for the discontinuation is to transition all trades, new and legacy, to different benchmarks. The option of last resort is to rely on the fallback language of existing contracts. The language for derivatives is currently not fit for purpose and is in the process to be reworded. In recent months several fallback-related consultations have taken place. The theme of this article is the fallback proposals. To the author point of view, the proposals are not satisfactory; the main proposal is not achievable in practice and a fundamental revision of the fallback's foundations is required. In a second part, the article describes the value transfer coming from the proposed adjustment spread computation. Part of the transfer has already taken place and more will take place in the near future. The source of the value transfer is analysed. A quantitative analysis of the spreads is provided and compared to recent market movements.

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