ISDA Fallback as an option

Good new for those who have not signed ISDA fallback protocol: the value of your option is increasing. For this you have to thank the 1,791 firms that have signed already (figure provide in a Risk article - subscription required).

1,791

I have explained the option value of the fallback in previous blogs, e.g. Signing the LIBOR fallback protocol: a cautionary tale (again). More other firms sign it, more the value of your options is increasing.

For this post, I have put the option in a formula. The slide below is extracted from a recent workshop on "Benchmarks in transition"

It uses the type of notation I have introduce for the fallback in a Risks article on LIBOR Fallback and Quantitative Finance

Don't hesitate to contact me for potential work on valuing your fallback options.

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