New Isda definitions pave way for bespoke swaps clearing
Pick-and-mix grid of floating rate options will make it easier to clear post-Libor bond hedges
A new set of interest rate definitions published by the International Swaps and Derivatives Association could make it easier for clearing houses to handle a wider range of compounding conventions for overnight risk free rates (RFRs) – including the so-called ‘observation period shift’ popular with bond issuers.
As they retreat from Libor, cash markets have adopted an assortment of conventions to create payment visibility in compounded-in-arrears versions of overnight RFRs.
The observation
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