The LIBOR Transition: Impact of SOFR Switch on Swaptions

Over the last several weeks global markets have experienced a period of extreme volatility. The Federal Reserve cut rates to 0% and the U.S. Government issued a $2T rescue package in response to the economic impact of COVID-19. While LIBOR transition efforts seem to have stalled somewhat as firms focus on day-to-day crisis activities, the LIBOR cessation deadline has not been delayed (yet) and firms continue to demand information on the topic.

As the October 2020 date rapidly approaches for LCH and CME to shift from using OIS to SOFR for discounting of US dollar interest rate derivatives, one key area being explored very closely by both market participants and the Alternative Reference Rates Committee (ARRC) is the impact of this switch on U.S. dollar LIBOR swaptions.

Leveraging an analysis of historical data for SOFR and LIBOR fixings and volatility, in this webinar Ping Sun, SVP of Financial Engineering at Numerix, will examine the impact of the Fed Funds/SOFR switch on value transfers for swaptions and explore what this could mean for swaption pricing going forward.

Join this webinar as Ping covers:

  • Market update and progress on the LIBOR transition
  • Impact on interim timelines and possibility of the 2021 deadline shifting
  • Review of SOFR compounding and LIBOR fallback
  • Analysis of historical fixings and historical volatility for SOFR versus LIBOR
  • Impact analysis of switching to SOFR for swaptions
  • Impact on swaptions of LIBOR fallback

 

Featured Speaker:

Ping Sun, PhD Senior Vice President, Financial Engineering, Numerix
Dr. Sun, PhD is Senior Vice President, Financial Engineering at Numerix. He is also product manager of the Numerix CrossAsset analytics platform. During his career at Numerix, Dr. Sun’s work has appeared in number of publications and academic journals, and he has been showcased as a lecturer at a range of academic events and industry conferences. Dr. Sun served as a consultant to Lehman Brothers as a FX / EQ Desk Quant, and his is extensive experience includes working to develop the Numerix cross-currency Economic Scenario Generator. He earned a Doctorate Degree in Physics from City College of New York, and a Master’s Degree and Undergraduate Degree in Physics from Fudan University in Shanghai, China.

 

JamesJockleModerator: Emily Jean-Pierre, SVP, Marketing & Corporate Communications, Numerix

 

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on-demand webinar

The LIBOR Transition: Fallback Curve Analysis