Packing the overnight bag: risk-free rates after Libor

From the end of 2021, banks will no longer be required to support Libor and may discontinue participation in the benchmark-setting panel. New risk-free overnight rates have begun to replace Libor (in most currencies) and their roll-out process is well under way.

The replacement of Libor with new benchmarks introduces significant challenges for market participants, especially those active in cleared derivatives, such as interest rate swaps. Preparing for challenges posed by the change in benchmarks will involve a significant amount of time and effort.

This white paper explores the areas that will most likely be affected by the changes. It further proposes solutions on how to make the transition easier as well as more cost-efficient.