Libor Transition Services
Streamline Your LIBOR Transition
Robust services for banks and financial institutions, supported by experts, made possible by our AI products.
Analyze Downstream Impact on Pricing and Risk Models
- Model validation and redevelopment triggered by LIBOR reform under new ARRs
- Validation of pricing and CRR models with adjusted RFRs, spreads and term structure for material positions
- Validation of risk and margin models—VaR, SIMM models impacted by new ARRs
- Maintaining Hedge Accounting and performing effectiveness testing
Discount and Forward Curve Construction and Calibration Indexed to ARRS
- Single curve/Multi curve construction/calibration using 1M SOFR future and 3M future/swap instruments
- Robust yield curve generation using CME SOFR 1M/3M Futures, SOFR/FEDFUND basis swaps, and SOFT/Libor basis swaps
- Enhancement of curves and re-pricing of interest rate sensitive banking and trading book positions across all asset classes
Counterparty Risks from LIBOR Transition are Analyzed and Aggregated
- Value transfer analysis for selected portfolios and follow-up negotiations and communication with the client.
- Impact on margins and SIMM calculations which may be triggered for existing derivative transactions on transitioning to alternative RFR’s
- Analysis of time simulation of new risk factors for enhanced understanding of new and emerging risk on counterparty exposures
- Continuous Improvement includes regular and ongoing identification of opportunities through rapid prototyping and modular implementation.
Pricing Library Migration and Testing for New Benchmark Rates
- Pricing Model recalibration and library migration across asset class, including structured products (MBS, ABS, and CDOs)
- Risk Sensitivity Testing in new pricing environment
- Cash flow and coupon calculation testing in the migrated library
- Current contracts are tested through the maturity/lifecycle analysis
Streamlined Alternative RFR in Treasury Systems for Trading, Pricing, and Reference Data Systems
- Robust alternative RFR historical data availability using standard market sources
- Databases created with relevant information and metadata from contracts (terms & conditions, fall back clauses, client names, etc.)
- Implementation of alternative data with RFRs in FO/treasury systems
Reference Case
LIBOR Set Aside - Who's Next in Line?
LIBOR or London Interbank Offered Rate, the benchmark interest rate at which major global banks lend to one another, was a very important number until recently. However, it fell out of favor after a large number of banks manipulated it to boost their profits. Subsequently, UK’s Financial Conduct Authority (FCA) decided to phase out LIBOR completely by 2021.
Related Resources
Optimize your outcomes.
LIBOR Transition’s Impact on the Derivatives Market
The London Inter-bank Offer Rate (LIBOR) is the most important rate globally, referencing nearly USD 370 trillion (as of 2018) equivalent of contracts that cover a myriad of products such as mortgages, bonds, and derivatives.
Model Risk Management Under NIRP
As of May 2020, four European monetary zones (the Eurozone, Denmark, Sweden, and Switzerland) along with Japan are firmly in negative interest rate territory.
LIBOR set aside – who’s next in line?
The once revered LIBOR fell out of favor after banks manipulated it to boost profits. With the FCA deciding to phase it out completely by 2021, companies will need to change their systems within a short span of two years. Are you prepared?
Will regulation reshape the index industry?
As the song goes, ‘the times they are a-changing’ for index providers and users. In the past decade, we have seen the rise of various financial regulations, which have created more challenges for the index industry.
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