Marc Henrard - Multi-curve framework

The letters " IB " in LIBOR stand for InterBank . The LIBOR fixings are suppose to represent the rate in the interbank market, with its pure interest rate component and its credit risk component. The spread between the LIBOR of a given tenor and the OIS rate for the same tenor can be viewed as a proxy for the credit quality of banks. In the August to October period, the spread GBP-LIBOR-6M/OIS-SONIA-6M has been between 17 and 19 basis points. From the end of October to today, the spread has increase from 19 basis points to 30 basis points. On the 3M side, the spread had been between 9 and 11 basis points and increased from 11 to 20 basis point in the same two-month period. In the same period the stock market was tumbling (the FTSE 100 lost more than 10% in the same period) and CDS indices spiking. That make sense as there is a high correlation between low stock prices, high credit spreads and higher default rate. But what happened to the basis spread for 30Y-tenor swaps LIBO...

Four documents related to the IBOR fallback have been published a couple of days ago: - Anonymized Narrative Summary of Responses to the ISDA Consultation on Term Fixings and Spread Adjustment Methodologies prepared for ISDA by The Brattle Group - LCH’s position in respect of ISDA’s recommended Benchmark Fallback Approaches - CME Group Supports ISDA’s LIBOR Fallback Provisions - Second public consultation by the working group on euro risk-free rates on determining an ESTER-based term structure methodology as a fallback in EURIBOR-linked contracts Those documents are welcome as they clarify the results of the ISDA consultation and the CCP positions. I will start with the CCP side. To my knowledge, this is the first time CCPs provide an explicit document related to the fallback. Up to now there were only informal " ISDA is liaising with the CCPs ". The content of CCP notes can be summarized as CCPs will adopt the new rules, but reserve the right not to do it and if a ...

More than 10 years ago, I proposed a (slightly) exotic product that I called Floored Instrument on Rolled Deposit , abbreviated with the eye catching name of FIReD. If the ISDA Fallback procedure is decided as announced recently with the adjusted RFR based on compounded overnight setting in arrears, my fictional FIReD will become a very common product. All IBOR cap-floors will be on FIReD. To explain this statement, I need to step back a little bit. FIReD A first version of the working paper describing the details of the product was published in 2005 ( SSRN: https://ssrn.com/abstract=888484 ). A related article was published in Journal of Risk ( Skewed Libor Market Model and Gaussian HJM explicit approaches to rolled deposit options , The Journal of Risk , 9 (4), Summer 2007). The idea of the product is the following: Money is invested at a given benchmark rate, let say overnight, for a long period with capital plus interest reinvested (compounded) at the end of each benchm...

A quick update on my basis position. I took a position on a basis swap where I pay LIBOR-1M v receive SONIA + spread on a 30-year tenor for a notional of 1m. The spread is at 13.45 bps. First an update on the different spreads (as of Friday 14 December), with in order, the figure before the announcement, the analysis prediction, the figure on the date I took the position and the figure today Name Announcement Prediction Position Today Libor 3M - SONIA 22.50 9 to 18 19.65 19.35 Libor 6M - Libor 3M 5.90 8 to 16 7.60 8.00 Libor 6M - Libor 1M 12.20 14 to 25 13.80 14.20 In all cases the spreads continue in the direction predicted by the analysis. For my position, there is not a very large movement yet. From 13.45 to 13.15, only 0.3 basis points gained. This is on top of the 2.75 bps that would have been the profit if I had open the position on the d...

"It is not illegal to be smarter than your counterparties in a swap transaction, nor is it improper to understand a financial product better than the people who invented that product." Richard J. Sullivan United States Circuit Judge 30 November 2018 This is an interesting statement from the judgement in the United States in the case "CFTC versus Wilson and DRW" ( full text available here ). The text of the judgement provide a (surprisingly?) good explanation of derivatives market, including convexity effect on futures. The judgement relates to IDEX 3-month futures. Those futures are not traded anymore since 2011. The text includes consideration about variation margin, basis risk, PAI, convexity adjustments, and futures design. The background is a badly designed swap futures where some participants notice the bad design and its implications while others didn't. The marketing of the futures claimed that " IDEX IRS futures are designed to be economi...

In my previous blog , I indicated that I was surprised by ISDA decision to use ‘historical mean/median approach’ for the spread adjustment. I also indicated that this fallback method will create some value transfer between the different sides of the existing trades. To my opinion, that value transfer will not take place at the discontinuation announcement date but at the fallback methodology announcement date, which is now. The full details of the exact spread computation methodology have not been announced yet, but we can already check some ballpark figures. I have looked at the GBP figures. The reason is that in USD there is no historical data for SOFR (not the multi-year history required by the methodology) and no liquid SOFR-OIS trading and in EUR, the new benchmark is not even published yet. I start with the LIBOR-3M/SONIA spread has this is the most liquid SONIA spread in trading. My analysis start from the hypothesis that the LIBOR will be discontinued on 1-Jan-2022. The an...

ISDA has published Preliminary Results of Benchmark Consultation . As expected, the majority of respondents preferred the ‘compounded setting in arrears rate’ for the adjusted risk-free rate (RFR). This is to my opinion an error, as detailed in my Quant Perspective . The proponent of the method have not yet detailed how it would work in practice for instruments that require an immediate settlement (FRA, IBOR in arrears, range accrual, etc.; a minority of trades but not a small amount) and vanilla instruments with non-good business day adjustments (the majority of trades). The ISDA statement indicates that " as part of that decision, the ISDA Board Benchmark Committee will set out the details related to the adjusted RFR and spread adjustment that remain outstanding ". Hopefully, the details related to the dates question I have mentioned in my answer to the consultation will be provided. The second part of the consultation provided an answer that I was not expecting. The sp...

Mandatory arbitrage Belgium is now imposing mandatory arbitrage in retail. I concede that this is a 2 cents (0.02 EUR) maximum arbitrage by transaction, but an arbitrage nevertheless. The arbitrage is imposed on retailer by forcing them to issue free option with each retail transaction. There is no limit to the number of transactions by customer and retailers cannot refuse the transaction (and the arbitrage). The mandatory free option was proposed by a Belgium vice-premier and minister of Economy ( Kris Peeters ; one of the top 5 minister in Belgium) and approved by the Council of Ministers. Obviously the minister press release does not describe his decision like I did. It is presented as a simplification measure without impact. The press release even indicate that "on average the consumer will pay the same amount". According to the press release, the ECB shares the analysis (I would like to see the analysis). The press release (in French) can be found here: http://ww...

In the IBOR fallback issue, there are different criteria we would like to impose in order to obtain a clean fallback. Among those criteria are the absence of value transfer and the coherence (IBOR is IBOR). The fallback procedures proposed in ISDA consultation rely on the replacement of each IBOR fixing by an RFR-linked rate plus an adjustment spread. The existence of CCP basis (and bilateral to CCP basis) which is potentially different between LIBOR products and OIS products leads to the following paradox: if we want to achieve the absence of value transfer, we need to select an adjustment spread that is different for the same IBOR and RFR depending on the clearing location, which is a violation of the coherence criterion. If we keep coherence, we have the same spread and consequently there is a value transfer. Where is the paradox coming from? I would say that it is coming from a misunderstanding of the OIS discounting formula. The formula is written as (see Formula 8.6, based ...

The Japan Banker Association (JBA) has published its Comments on the Consultation on Interbank Offered Rate (IBOR) Fallbacks for 2006 ISDA Definitions . Their comments are similar to the ones I mentioned in my Quant Perspective on the major issues: Forward-looking term rates we believe that ISDA should carefully consider how the development of forward-looking term rates will have impacts on the fallbacks for derivatives This is in essence equivalent to my Option X1: OIS Benchmark but expressed in a different way. The existence of the working group on GBP end EUR on the specific subject of the term rate RFR was already an indication that the decision of ISDA of not including the option in its consultation is not the first choice by all market participants. We have now also a similar opinion on the JPY side. Not achievable option There may be some cases (for example, in LIBOR in arrears swap) where it is unable to complete the fixing in time for floating rates payment....

Yes, I said decreasing . Nowadays nobody is interested by real time news. Receiving yesterday news today in the morning is what is required. A least that is the impression I get when looking at the RFR new benchmarks and their publication dates. Old New Currency Name Lag Name Lag USD EFFR T+1 SOFR T+1 GBP SONIA T Reformed SONIA T+1 EUR EONIA T ESTER T+1 Why publishing the result related to data collected immediately when one can sleep on it overnight? There is obviously the risk that insider information can be used in the mean time, but we would stay up at night for such a triviality? Chacun sa méthode... Moi, je travaille en dormant et la solution de tous les problèmes, je la trouve en rêvant. (Personal translation: Each his own method... Myself, I work sleeping and the solution to all problems, I find it dreaming). Drôle de drame (1937) - ...

I continue my quest related to the IBOR fallback issue. I still fail to understand the precise meaning of the " Compounded Setting in Arrears " option for derivatives subject to the fallback. I have contacted several people at ISDA ( as reported here ) and others that are mentioning this option. I have not yet received a clear answer to the issues I have reported in my " Quant perspective on IBOR fallback " and in my answer to the ISDA consultation. The dates between the IBOR underlying deposit and the derivatives do not match in all cases. How do you pay an amount before you know how much you have to pay (the time difference can be as long as the IBOR tenor)? The answers I received are some version of " To be decided ", " The impacted trades will mature before the discontinuation ", or " The term sheets will change in the mean time ". All of those answer do not answer the content of the question: To be decided : No! The details h...

Risk published an article on the different initiatives related to the term RFR rates: Search for term Libor replacement hits twin barriers (subscription required). I was interviewed by Risk a month ago on the subject of the term RFR rates and the IBA "ICE term RFR" based on SONIA. I also posted a blog on the subject a month ago: ICE Term Risk Free Rates . Risk magazine quoted me saying (yes this is me quoting someone quoting me): “The futures have a fixed start date and end date; say from 1st of month to 1st of next month. What we need for term benchmarks is from today to today plus one month or three months, for example, from November 11 to December 11. How do we extract that information from the futures? We have to get part of the information from the November 1 to December 1 futures and part from December 1 to January 1. How this is done is subjective and depends on information that is not visible in the futures market,” says Marc Henrard, head of quantitative research ...

I'm proud to announce that my appointment as Visiting Professor in the University College London -  Department of Mathematics has been extended to May 2021.

A couple of weeks ago, CME announced that they cleared their first SOFR-linked swaps . The first trades where cleared by BNP Paribas, Credit Suisse, J.P. Morgan, Morgan Stanley and NatWest Markets. The total notional was USD 200 million without details on the type of swaps or their maturity. The main difference between the SOFR-linked swaps cleared at LCH and those cleared at CME is the Price Alignment Interest (PAI)/collateral rate. For LCH it is EFFR while for CME it is the SOFR itself. Both CCPs accept OIS (Fixed v SOFR) and basis (LIBOR v SOFR and EFFR v SOFR). Also LIBOR, EFFR and SOFR futures are traded. This means that now we have the full spectrum of legs types, PAI and adjustments: LIBOR leg with EFFR collateral (LCH, CME, bilateral) OIS-EFFR leg with EFFR collateral (LCH, CME, bilateral) OIS-SOFR leg with EFFR collateral (LCH, bilateral?) LIBOR leg with SOFR collateral (CME in basis swaps) OIS-EFFR leg with SOFR collateral (CME in basis swaps) OIS-SOFR leg w...

The ISDA Consultation on Certain Aspects of Fallbacks for Derivatives Referencing GBP LIBOR, CHF LIBOR, JPY LIBOR, TIBOR, Euroyen TIBOR and BBSW closed yesterday. I have send my answer to the consultation last week. The document of my answer can be found below. Marc Henrard answer to ISDA consultation on IBOR fallbacks.

The deadline for the responses to the ISDA Consultation on Certain Aspects of Fallbacks for Derivatives Referencing GBP LIBOR, CHF LIBOR, JPY LIBOR, TIBOR, Euroyen TIBOR and BBSW has been extended. The date has been changed from Friday 12 October to Monday 22 October 2018. You still have the week-end to read the documents and answer to the consultation.

I will start with my usual rant about " risk free ". SONIA is based on unsecured transaction and is credit risky. Not risk free on the credit side. A term rate is, as its name says, fixed for a term and the value of a term instrument changes when the market changes during that term. Not risk free on the market side. I cannot understand why this incorrect terminology of " risk free " is so widely used while plenty of correct and more meaningful terminology are available: collateralised rate , overnight-linked rate , overnight-indexed rate , derivative term rate , alternative rate (I don't like alternative rate too much either, it opposes the current name to a previous approach instead of positively describing the present, but it is better than risk free), IBA (ICE (InterContinental Exchange) Benchmark Administration; I like those acronyms based on acronyms) is launching a "ICE term RFR" . The term rate is based on futures prices. The first version ...

I have received numerous feedbacks on my " Quant Perspective on IBOR Fallback Proposals " document. I have updated the document and a version 1.1 is now available on SSRN: https://ssrn.com/abstract=3226183 Don't hesitate to contact me for discussion about the subject. Convexity adjustment for Option 1: Spot Overnight Rate. See the note for the details.

The US Fed has hiked rates several times in the last year. What was the market's expectation for those hikes six or twelve month before they happened? To estimate that, you can ask many market participants about their expectations every day and then average the answers. This is the polling approach. Instead of asking where their mouth is, you can also look where their money is. Interest rate derivatives are the most liquid financial instruments, worth a lot more than many mouths. How do you read the market expectation in derivatives? The overnight-indexed swaps (OIS) are linked to the Effective Federal Fund Rates (EFFR). Those swaps are liquid and usually trade with standard tenors like 1, 2, 3-months. It is possible to extract from those instruments the market expectation about futures rates. This can be done in a systematic way using curve calibration on those OIS with interpolation mechanism that imply constant rates between FOMC meetings and allows for jumps on those dates. ...

Some years ago I proposed an innovative design for risk-based swap futures. I worked with ASX to adapt it to the AUD BBSW swap market and a product based on that design has been traded on the exchange since 2016 (even if it has not attracted a lot of trading activity). With the new importance of overnight benchmarks, the ETD market has to find a product that could be used for price discovery and risk management of the full term structure of interest rate. I have detailed a version of the generic futures design to match the overnight conventions and OTC markets. The product has been presented to the main interest rate futures exchanges in Europe and the USA. We will see if it takes a new life. The technical details are now available in the form of a note. The document can be downloaded from SSRN at https://ssrn.com/abstract=3238640 . In the graph below I have displayed the convexity adjustments between the ETD futures and the OTC swaps that can be obtained with this design (i...

Game of Benchmarks: Season 2 Game of Benchmarks: Season 2 - Episode 3: Timing   Question related to: Description of Adjusted RFR - Fixing timing The simplest option for adjusted RFR in the ISDA IBOR fallback consultation is Option 1: Spot Overnight Rate. The option simply replaces an IBOR fixing on a given date by an Overnight fixing on the same date. Even this simplest option has to be assessed carefully in term of practical achievability. The overnight rate are known only at the end of the fixing date or the next day in the morning while the IBOR fixing are known shortly after 11:00 am. Is there some provisions in some derivative contracts that would require to know the fixing by 11:00 am? For example the cap/floor are exercised — even if it is automatic exercise — at 11:00 am. Can the exercise mechanism be delayed to the end of the day or even the next day? The fallback provision should describe what would happen to the contracts that have a tied schedule linked t...

The market infrastructure for interbank lending and derivatives has dramatically changed over the last ten years. The interbank lending is done now mainly on a secured basis. Derivatives are margined daily with variation margin guaranteeing the full present value of the trades. The world of interest rate benchmarks is also rapidly changing with the possible discontinuation of the IBOR benchmarks that have reigned on the benchmark kingdom over the last 30 years and the emergence of secured rate overnight benchmarks. All derivative users are now well aware of the difference between overnight-indexed swap (OIS) rates and term LIBOR deposit rates even if its discovery may have been sudden to some market participants in 2007. When we combined the secured term lending, the collateralised derivatives and the secured benchmark, what is left of the OIS-term deposit difference? This is the question I try to answer in a brief note now available on SSRN at https://ssrn.com/abstract=3258690 U...

At a recent ISDA meeting, a FCA representative, Edwin Schooling-Latter, positively commented on the achievability of term versions of RFRs. His comments are presented in a recent Risk article titled '' Term versions of RFRs will work – FCA official ''. This comments goes in the direction of the opinion of many (but not all) market participants but is in opposition to many regulators public comments (in particular the FSB OSSG) and against the indication in the FAQ associated to the ISDA consultation on IBOR fallback . The term rates are not even an option in the ISDA consultation. There are two different issues associated to the "term rates" question: the IBORs fallback and the standard for new trades. For new trades , you can change the rules and do what you want/is the most convenient in the circumstances. For legacy trades , the fallback changes the reference rate when the contractual one is not available, but does not change the other aspects of the cont...

The ECB has announced the result of the public consultation about the alternative EUR overnight benchmark. As expected, the ESTER rate, to be published by the same ECB, has been recommended by the Working Group on 13 September 2018 be used as the risk-free rate for the euro area. I still don't like the name risk-free rate (RFR). As described on the ECB ESTER page , " ESTER will reflect the wholesale euro unsecured overnight borrowing costs of euro area banks ". The rate is for unsecured and credit-risky transactions. The world is now divided in two groups, one where the reference overnight benchmarks are secured overnight rates - e.g. USD and CHF - and one where the reference overnight benchmarks are unsecured overnight rates - e.g. EUR and GBP. That can only increase the cross-currency basis and give more work to quants. On the secured rate front, we will soon have two competing term rates: OIS-like derivatives based on repo overnight rates and term repos. What is the l...

Another overnight-linked futures. CME is planning to launch SONIA futures. The futures would come in two flavours: Quarterly IMM dates and MPC meeting dates. More details can be found on CME website at https://www.cmegroup.com/trading/interest-rates/sonia-futures.html . To my knowledge, this is the first time that a central bank meeting date futures is launched. The central bank meeting date futures is one of the options I had proposed in my design of overnight-linked futures. Other financial institutions issuing SOFR linked paper. Credit Suisse has issued a six-month certificate of deposit linked to SOFR. The paper pays SOFR+35bps. More details in the FT article " Credit Suisse becomes first bank to issue debt tied to Sofr "(subscription required). Barclays has issued commercial paper linked to SOFR. See the Bloomberg article " Libor Challenger Embraced in Debut Commercial Paper Transaction ".

A month ago, ISDA launched a consultation on IBOR fallbacks . The question of the fallback in case of a benchmark discontinuation has obviously legal background. Parties to the derivatives contracts have to ask themselves: What is the meaning of what I signed? Is it really what I want? The answer to the last question is probably: " no, it is not what I want! " This is why most of the derivatives users agree that a change in the fallback language is required. Once you are convinced that what you have is not what you want, you have to review the alternatives. I have published a note with a personal review of the alternatives from a " quant " perspective. Even if personally I would prefer to the called it a "qualitative analysis" as before assessing the quantities associated to the alternatives, you have to check their qualities against a set of qualitative criteria. The note gives some background for the Season 2 of Game of Benchmarks: The Questions! T...

More and more SOFR-linked products appear. This time it is the World Bank which issued a SOFR-linked floating rate note (ISIN: US459058GK33), with a two-year maturity and a coupon of SOFR+22bps paid quarterly with a 4 days lockout. The notional issued was 1 billion notional. This is the longest maturity I have seen so far for a SOFR-linked instrument. Once more a lockout period which transforms a compounded setting in arrears into a partially setting in advance rate. The press release can be found here . It appears that on the same date very large SOFR v LIBOR swaps were traded. The total notional of the swaps was USD 920 millions. More details are provided in the Risk article World Bank completes first SOFR bond hedge .

Over the past couple of years, in parallel to my work as Head of Quantitative Research at OpenGamma ,  I have been working as a freelance advisor on a couple of projects. Those projects include designing of a new interest rate futures, presenting multiple executive training, advising hedge funds on the multi-curve and collateral framework, advising on CSA, Variation and Initial Margin frameworks and commenting on regulations. For those projects, I'm working under the structure of an independent advisory firm called mu Ris Q Advisory. Its (concise) website can be found at http://murisq.com/ Don't hesitate to contact me regarding its services or for training, model validation, product design and risk management strategies.

The following quotes are from a recent article in Risk titled " Esma: Eonia can be used in CSAs after 2020 ". Jakobus Feldkamp, senior policy officer for market integrity at the Paris-based European Securities and Markets Authority, tells Risk.net that CSAs will not be dragged into the BMR. “Esma agrees that it can be argued that a reference to Eonia in a bilateral agreement on an individual exchange of collateral under an OTC derivative is not strictly ‘use of a benchmark’ in the sense of the BMR,” says Feldkamp. The Article 3 (1) (7) of the European Benchmarks Regulation (BMR), refers to " determination of the amount payable under a financial instrument or a financial contract by referencing an index or a combination of indices ".  The regulation enters in full force on 1 January 2020. The question behind the interpretation of this sentence is to know if CSA referring to EONIA can still be legally used in Europe after that date. Not a minor issue certainly. ...

A floating rate note and a futures, this is what this week brings us on the SOFR front. Fannie Mae has launched SOFR-indexed notes. The issuance is described in a Risk article: Investors cheer debut Fannie SOFR note launch . Three notes with maturities of 6, 12 and 18 months are issues, with spread of 8, 12 and 16 basis points above compounded SOFR. The accrual periods ends with a four-day lock-out period, similar in some way to the two-day lock-out for the Fed Fund swaps. Once more this means that the debate between forward-looking term rates and compounding backward looking rates is wide open. In the same week, the Intercontinental Exchange has announced October 1 Launch of ICE One and Three Month SOFR Futures . This extends the ICE overnight offering beyond the SONIA futures for which 100 billions notional have been traded and competes with the similar products at CME .

Game of Benchmarks: Season 2 Game of Benchmarks: Season 2 - Episode 2: Triggers   Question related to: Description of Fallbacks - Triggers In the triggers description, the benchmark to which a fallback would be applied is called “the relevant IBOR”. The list of those relevant IBOR is “GBP LIBOR”, “CHF LIBOR”, “JPY LIBOR”, etc. The relevant IBOR does therefore not include the tenor. It is not clear from the text if the trigger applies on a tenor by tenor basis or on a full “family". Could there be a situation where one tenor, e.g. GBP-LIBOR-12M, is discontinued but not the others in the same family, e.g. GBP-LIBOR-3M. Would the discontinuation of one tenor trigger the fallback for all of them? Could you clarify the tenor/family issue in the FAQ and potentially adapt the trigger wording? Edit on 18-Aug-2018: I have received an answer from ISDA regarding the above question: If the discontinuation is of one tenor only, then it is likely that market participants w...

On 12 July 2018, ISDA has published a Consultation on Certain Aspects of Fallbacks for Derivatives Referencing GBP LIBOR,1 CHF LIBOR, JPY LIBOR, TIBOR, Euroyen TIBOR and BBSW . I'm preparing a quant perspective on IBOR fallback proposals that I will publish in the coming days. In the mean time, by reading the consultation document, I have a certain number of questions related to the clarification of the wording or the formulas proposed. I'm sending the questions to the ISDA email associated to the consultation and I'm also posting them here. I will update the post when I have an answer or a clarification. This is Game of Benchmarks: Season 2 Game of Benchmarks: Season 2 - Episode 1: Compounded Setting in Arrears Rate question   Question related to Option 3: Compounded Setting in Arrears Rate   The three dates that characterise a IBOR fixing are its fixing date, the effective date of the underlying deposit and the maturity date of the same deposit. When ...

Last week, on Wednesday 18 July, LCH has announced the first cleared SOFR linked swaps . According to a Risk article (subscription required), the first trade was a SOFR V EFFR basis swap. Now the real fun start. Compute all the basis and check how they behave!

Financial Fiction Episode 3: Risk-based futures For linear interest rate derivatives, risk and DV01 are considered as very similar expressions. This is also what we can deduce from the name of the latest new futures launch by NASDAQ. Some five years ago, I proposed a new design for interest rate futures that I called risk-based futures. I worked with ASX in 2014 to adapt the design for the AUD market. At the end of 2015, ASX launched a swap futures based on that design . The ASX product has an extra feature of having a variable tick value, but the central feature of the design is the same: a futures price representing a rate or yield and the physical delivery of an ATM trade on the futures expiry. NASDAQ will be launching soon its DV01 Treasury Futures . According to NASDAQ, the new product will be available for trading on Thursday, July 19, 2018, pending regulatory approval . The name "risk-based futures" (1) has been changed to "DV01 futures", but the...

In a recent Risk article ( Clearers diverge on SOFR swaps discounting - subscription required) it was indicated that, contrarily to previous announcements, when CME will start to clear SOFR linked swaps, the interest used for Price Alignment Interest (PAI) will be SOFR itself and not the EFFR which is used for other USD OTC derivatives. This is also a departure from the initial ARRC suggestion. Regarding LCH, the current indication is that it will clear SOFR linked swaps with EFFR PAI. This means that out of the six variations of overnight-linked derivatives discussed in a previous blog , five will be available in Q3. It is not certain that the sith variations will ever be really traded, but we can expect that if SOFR is becoming the benchmark benchmark (I'm not sure it is the correct term, but it seems appropriate here) at some stage some legacy EFFR OIS will switch to SOFR for collateral. From a long term perspective, it seems logical to clear SOFR based swaps using SOFR collat...