Immediately after December 31, 2021, all LIBOR settings for the issuance of new derivatives contracts will cease to be provided.
Despite significant progress being made globally, the result of the transition away from LIBOR will be wide-ranging, having significant consequences on new issuance, trading operations, valuations, and the way institutions will conduct business in the future.
As the clock starts to run out on the LIBOR transition, there are several crucial issues market participants face in 2021. In this new whitepaper, Numerix LIBOR transition expert Liang Wu provides his views and insights on the key themes that deserve examination.
Get up to speed fast by reviewing these top 5 market themes dominating the LIBOR transition in 2021:
- The End of LIBOR: The end date of key U.S. LIBOR tenors was extended from December 31, 2021 to June 30, 2023. While this may be helpful to the market, institutions should not get the wrong impression of what it means.
- The SOFR Term Rate: A forward-looking SOFR term rate is unlikely to be published this year. How may this affect market participants?
- IBOR Fallbacks: With the new fallbacks now in place, financial institutions need to make sure their analytics and models are capable of supporting new valuation methodologies. This may require technology upgrades.
- Cross-Currency Outlook: The cross-currency markets have yet to embrace SOFR. Could 2021 be the year when there is a big boost in trading in the cross-currency markets using SOFR?
- Talking about Ameribor: There is demand in the U.S. for a credit sensitive rate that is an alternative to SOFR. Does the derivatives market need a credit sensitive rate?
