The International Swaps & Derivatives Association (Isda), Bloomberg and law firm Linklaters have released new guidance on interbank offered rate (Ibor) fallbacks with an overview of the proposed methodology to calculate adjusted risk-free reference rates (RFR) as fallbacks for key inter-bank offer rates (Ibors).
Libor is a heavily used interest rate benchmark globally with more than US$350 trillion worth of contracts referring to it. It is expected to be replaced after 2021 and under proposed Isda documentation, it will fall back to the overnight rate in the relevant currency (such as Sonia or SOFR) which have different behavioural characteristics to Ibors. This means that adjustments to these overnight rates need to be made - including the addition of a spread, which will be published by Bloomberg. S
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