Libor 2.0: The runners and riders
From home loans to bonds and interest rate swaps, a host of very different markets are linked to Libor, which makes it difficult to replace the damaged benchmark. A number of alternatives are available, but disparate products may be better served by disparate reference rates. Tom Newton reports
Since US and UK regulators announced the June 27 settlement of investigations into Libor rigging at Barclays, commentators have been predicting the death of the benchmark – but it is not easy to replace an interest rate referenced by an estimated $300 trillion in financial products.
“Putting aside the terrible way Libor is fixed – by asking dumb questions to banks – it’s actually a marvellous construction of a family of derivatives and cash instruments that work so well together. It’s a
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