Marc Henrard - Multi-curve framework

The new fallback supplement has been published by ISDA ( Supplement 70 in Supplements to the 2006 ISDA Definitions ). It is 107 pages long! It is very long but does not contain any information about the fallback mechanism itself!! Moreover the fallback mechanism can be changed at the caprice of a third party (or actually a fourth party) and it will cost you USD 20,000 or more a year!!! Even after reading it, I still don't understand what the fallback mechanism is!!!! Before going through the different points, a little graph. If the meaning of the graph and its relevance to the fallback supplement is not obvious to you, I would advise you to read the supplement more carefully (or you can read here )! 107 pages long This is a very long document. It contains many repetitions, for each currency and rate option, it is written in "legalese". One good point is that is contains some "fallback of fallback", i.e. what is happening if the planned fallback (like SOFR

We are approaching the publication date for the new ISDA definition related to the IBOR fallback and the related protocole. Questions related to their impact are becoming more and more urgent. I was interviewed once more by Risk about those issues. Some quotes will probably appear in a Risk article in the coming days or weeks. Here is a more extensive summary of my comments. I'm starting with a graph without comment. If the meaning of the graph and its relevance to the protocol signature is not obvious to you, I would advise not signing the protocol! See my first cautionary tale about signing the LIBOR fallback protocol . A robust fallback is important, the fallback embedded in the current ISDA definitions is not robust. Something need to be done about it, preferably before January 2022. Where I disagree with the marketing barrage in favor of the ISDA protocol that we have seen recently is that the ISDA proposed fallback is the only one that is possible. I even disagree

 This is a follow up on previous post on Where is ESTR? , Where is ESTR? (2) , Where is ESTR? (3) and Where is ESTR? (4) . It has been more than two months since the main CCPs have switch their PAI to ESTR in EUR and it should be the standard now. What do we see in the LCH data? Almost nothing! The monthly volume for ESTR OIS was less than 70 bn (USD equivalent), just  above 1/3 of what is was in January and February (see graph below). Not a very positive trend. The only positive trend, if I really have to find one, is that the volume for maturity above 2Y is increasing. With a notional of 23 bn, this is the highest since the start of ESTR.   This means a total volume for ESTR OIS of 774 bn since the start of the year. This is in contrast with the 62 trn in all OIS (EONIA and ESTR). ESTR-linked products are only 1.25% of all overnight-linked products (unchanged with respect to last month).   Were are only a little bit more than a week away from the EFFR to SOFR change for the col