Libor replacement jumble may hike hedging costs
Use of term rates and credit adjustments will create new basis risks that could be costly to hedge
Loan issuers are being urged to stick with standard Libor replacements and avoid the use of forward-looking term rates and credit spread adjustments, which may splinter the market and create new basis risks that could be costly to manage.
“If such consistency is achievable it would also have the potential to reduce complexity with regard to internal risk management practices and hedging purposes,” said Mikael Stenstrom, senior adviser on market operations at the European Central Bank.
The
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Markets
Supply chain decoupling fires up alpha focus at BofA
Talking Heads: Stock dispersion sees funds gross up on long/short baskets, while US structured notes come of age
Barclays disputes CDS committee decision ahead of auction
Representing the bank, law firm Milbank argues the committee’s approach risks constraining the market and goes against expectations
How Risk.net’s robots unlocked Ucits trade data
Machine learning tool helps reveal the largest European derivatives users – and who they trade with
Pricing and funding woes hit gilt repo
QT-driven funding cost rises combined with clients’ price demands see at least two banks pull back
China set to extend NDF trading scheme for onshore banks
CFETS expected to introduce RFQ functionality and more currencies for non-deliverable forwards
New data reveals Pimco is top Ucits interest rate swaps user
Counterparty Radar: US managers and dealers reign supreme in European retail fund space
Goldman appoints new financial risk head
Promotion sees Josh Schiffrin oversee strategy and financial risk, including trading supervision
Another post-Libor rate aims to clear Iosco bar
After two rivals were slapped down by the benchmark overseer last year, will Axi fare differently?