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Has LIBOR Lost Its Stature in Derivatives Markets? Case Solution

Case Solution & Analysis for Has LIBOR Lost Its Stature in Derivatives Markets? by Walid Busaba, Ken Mark.

Complete Case details are given below :

Case Name :      Has LIBOR Lost Its Stature in Derivatives Markets?
Authors :           Walid Busaba, Ken Mark
Source :              Ivey Publishing
Case ID :           9B16N058 / W16695
Discipline :        Finance
Case Length :    12 pages
Plagiarism : NO (100% Original work)
Description for case is given below :
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.
 
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