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Has LIBOR Lost Its Stature in Derivatives Markets?
內容大綱
In April 2016, a large U.S. proprietary trading group in New York, with a significant fixed-income portfolio, was debating what discount rate to use to value the group’s interest-rate swap portfolio. The counterparties to these swaps were major banks, and the deals were collateralized. Criticisms about the use of the London interbank offered rate (LIBOR) as a benchmark for valuing these swaps were circulating, and there were reports that LIBOR was being manipulated. There was talk about an alternative, nearly “risk-free” reference rate that could potentially be launched during 2016. Was it time for the trading group to substitute some of its maturing LIBOR-based interest-rate swaps with overnight index swaps?
學習目標
This case has been designed for use at both the undergraduate and graduate levels and can be used in courses on international finance, investments, fixed-income markets, and derivatives securities. After completing the case, students will have developed their ability to do the following:<ul><li>Appreciate the historical evolution of the LIBOR market and the recent scandals.</li><li>Understand the differences between LIBOR and OIS rates.</li><li>Identify why and how LIBOR or OIS would be used in valuing derivatives.</li><li>Calculate forward interest rates from the zero yield curve.</li><li>Value an interest-rate swap.</li><ul>