The Challenges Of Replacing Interbank Offered Rates

Law360 (June 27, 2019, 2:33 PM EDT) -- Despite being part of the financial landscape since 1986, interbank offered rates, or IBORs, are being phased out, and are to be replaced with rates that more accurately capture a risk-free rate. The core issue when transitioning away from an IBOR to an alternative rate is the fact that the replacement benchmarks, whatever they turn out to be, will be inherently different than the previous rates.

Most alternatives are market-based rates, and have shown themselves to be more volatile than IBORs. Of course, this is the entire point of the exercise: The new benchmarks are different because they more accurately reflect...

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