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

Increased-hedging-costs

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 [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: