Japan debuts swaptions linked to risk-free rate
Sparse liquidity in Tonar swaps may put premium on swaption pricing, dealers warn
Yen interest rate swaptions linked to the Tokyo overnight average rate, Tonar, have begun to trade in recent weeks, in a move dealers say is an important milestone in the adoption of the alternative risk-free reference rate in Japan’s swaps market.
But experts are sounding caution over thin trading in Tonar swaps, which could result in a liquidity premium for swaption pricing. And plans for
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