Further news regarding Alternative Reference Rates
A couple of days ago, the US Alternative Reference Rates Committee has published an announcement regarding its " preferred alternative reference rate ". The announcement can be found on the New York fed web site at https://www.newyorkfed.org/arrc/announcements.html . The proposed rate is based on repo transactions. It is certainly a useful new benchmark and a useful reference for " new USD derivatives ". A discussed previously in this blog in post on similar subjects, and as implied by the name of the committee, this is an alternative reference rate, not a replacement of the LIBOR rate. The repo rates have a different credit implication than the inter-bank transactions underlying LIBOR. The risk management and valuation features of the two benchmarks will be different. The new benchmark will lead to " certain new U.S. dollar derivatives ". Implicitly, this means also new markets, new clearing infrastructure, and new master agreements and CSAs. The alterna...