World Business StrategiesServing the Global Financial Community since 2000

Thursday 26th March 2020

With the increased expectation of some IBORs discontinuation and the increasing regulatory requirements related to benchmarks, a more robust fallback provision and a clear transition plan for benchmark-linked derivatives is becoming paramount for the interest rate market.

The recent regulations include the EU Benchmark Regulation (BMR) which may have a severe impact on the EUR market as early as January 2020. For all major currencies, new benchmarks have been proposed and the market are in a transition phase. Each transition has his idiosyn- crasies and a commun transition approach cannot be expected. We also describe the new products associated to the new benchmarks and the status in term of liquidity for each market.

On the fallback side, several options have been proposed and ISDA held a consultation on some of them. The results of the ISDA consultation has been to select the\compounding setting in arrears” adjusted rate and the “historical mean/median” spread approach. We analyse the proposed options in details and present an alternative option supported by different working groups. The presentation focuses is on the quantitative finance impacts for derivatives.

Cash-collateral discounting.

  • The standard collateral results and their exact application.
  • What is hidden behind OIS discounting (and when it cannot be used)?
  • Impact of new benchmarks on valuation

EU Benchmark regulation

The “alternative” benchmarks:

  • Secured v unsecured choice.
  • What about term rates?
  • Curve calibration
  • SOFR and EFFR: two overnight rates in one currency!

Status in different currencies. Cleared OTC products, liquidity. The different consultations in progress and what to expect from them.

Fallback procedure

  • ISDA consultation results
  • The adjusted rate: compounding setting in arrears
  • The adjustment spread: historical mean/median approach
  • Quantitative issues with compounding setting in arrears
  • Term rates: a credible alternative?
  • Value transfer: transfers already incorporated and transfers to come

Clearing House adoption

  • Differences between bilateral and CCP rules
  • EFFR to SOFR transition in USD

Risk management of the fallback

  • Delta risk through the transition
  • Potential impacts on systems
  • What a risk solution would look like
  • Multi-curve: double or quit?
  • Vanilla becoming exotics: cap/ oor and swaptions

New products associated to new benchmarks

  • Volume and liquidity in the new benchmarks
  • Futures on overnight benchmarks
  • Deliverable swap futures

Detailed lecture notes for participants.
Some details will be adapted to the evolution of the market.


Marc Henrard:

Managing Partner muRisQ Advisory and Visiting Professor, University College London

Marc Henrard: Managing Partner muRisQ Advisory and Visiting Professor, University College London

Over the last 20 years, Marc has worked in various areas of quantitative finance. Marc’s career includes Head of Quantitative Research at OpenGamma, Global Head of Interest Rate Modeling for Dexia Group, Head of Quantitative Research and Deputy Head of Interest Rate Trading at the Bank for International Settlements (BIS) and Deputy Head of Treasury Risk also at BIS.

Marc’s research focuses on interest rate modeling and risk management. More recently he focused his attention to market infrastructure (CCP and bilateral margin, exchange traded product design, regulatory costs). He publishes on a regular basis in international finance journals, and is a frequent speaker at academic and practitioner conferences. He recently authored two books: The multi-curve framework: foundation, evolution, implementation and Algorithmic Differentiation in Finance Explained.

Marc holds a PhD in Mathematics from the University of Louvain, Belgium. He has been research scientist and university lecturer in Belgium, Italy, Chile and the United Kingdom.

Workshop Schedule 09.00 - 17.30

Break: 10:30 – 11:00
Lunch: 12:30 – 13:30
Break: 15:15 – 15:30

  • Discount Structure
  • Special Offer
    When two colleagues attend the 3rd goes free!

  • Conference + Workshop
    €300 Discount

  • 70% Academic Discount
    (FULL-TIME Students Only)

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