Libor

Reference Rates Upgraded to all new Avatars (Part 3 of 3)

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The final installment of a series on the re-building of LIBOR

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Article: Reference Rates Upgraded to all new Avatars | (Part 2 of 3)

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Last week, I have introduced reference rates, their usage in financial industry, existing loopholes, attempted manipulation and proposed recommendations by FSB (with OSSG) to revamp these reference rates in order to make them robust and transparent (http://www.theotcspace.com/2014/10/29/reference-rates-upgraded-all-new-avatars-part-i-3). In this article (Part 2 of 3) I explain about these recommendations in detail and also the advantages of implementing them.

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Reference Rates Upgraded to all new Avatars | (Part I of 3)

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This article is Part 1 of my explanation on recent recommendations suggested by the Financial Stability Board (FSB) on existing reference benchmark rates. 

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ISDAFIX, Looking for Evidence of Price-manipulation

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There has been much recent press on the investigations into ISDAFIX and whether this will turn-out to be similar to the LIBOR rigging scandal.

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UK vs US regulators on Libor | FT article

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A dual track system to pave the way for a new benchmark tied more closely to objective data? At least this is what Martin Wheatley, the UK regulator leading efforts to reform the London Interbank Offered Rate, has told the Financial Times. On the other side of the Atlantic however, this idea would not seem that appealing as US regulators push for “prompt” switch to transaction-based rates.

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Even after choosing a new benchmark - LIBOR may be around for another 30 years

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What will replace LIBOR?  The benchmark choice to replace LIBOR seems to be between OIS, GC repo rates and government bond yields.  Too early to call but GC repo seems the consensus front-runner being both liquid and the real cost of most of bank funding (whereas OIS is not so liquid and government bond yields are not closely enough correlated with the cost of bank funding).

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CFTC’s Gensler on Libor | Is it the end?

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It seems that what until now has only been an open sceptisism on Mr Gensler's side, is now considered to be the strongest indication that regulators are more than eager to replace LIBOR with an alternative benchmark. As Mark Carney, the future Bank of England governor who heads the Financial Stability Board, said last week "regulators hope to have sorted out a way forward on benchmarks including Libor by this time next year".

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‘xVA’s’ have found their way in to pricing and valuation

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A common theme emerged on the first day at the Global Derivatives Trading and Risk Management Conference. CVA, DVA and FVA (but also a number of other components) have found their way into pricing and valuation models of financial institutions after the financial crisis of 2008.

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Is this LIBORgate 2? | ISDAFix and ICAP

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The Bloomberg article here and the FT article here outline a CFTC probe into ICAP activities around setting swap rates in the ISDAfix calculation in conjunction with panel banks in 2008/2009. Jon S.

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Avoiding the BCBS / IOSCO Margin Requirements for Bilateral Portfolios

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As everyone keeps saying, there will be unexpected outcomes from the new regulations, and one of them is about to turn the ISDA CSA upside down. Given the severe margin requirements for bilateral (non-cleared) trades, a 10 days 99% VaR segregated by asset class, this has driven research into exposure management much harder than before, to find a way to limit the costs of posting such large amounts of margin. A number of techniques are presenting themselves which hadn't been looked in detailed before. Ben Larah at Sapient alerted me to this line of thinking, as did Amir at ClarusFT.

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