Libor expert: don’t rely on forward RFR rates for transition

Swaps users should embrace backward-looking risk-free rates instead, says chair of UK working group

Libor transition

Forward-looking risk-free rates (RFRs) may not be ready before legacy instruments need to be weaned off Libor and so users should prepare to move to backward-looking benchmarks, according to the chair of an RFR working group.

Currency-specific working groups have so far selected RFRs based on overnight rates as alternatives to Libor. For swap contracts, these rates are generally based on a daily compounded overnight rate – for instance, a three-month Sonia rate.

Compounded overnight rates can

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