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Applying historical data from the USD LIBOR transition period, we estimate a joint model for SOFR, Fed Funds, and Eurodollar futures rates as well as spot USD LIBOR and term repo rates. The framework endogenously models basis spreads between each of the benchmark rates and allows for the decomposition of spreads. Modelling the LIBOR-OIS spread as credit and funding-liquidity roll-over risk, we find that the spike in …
The financial industry has undergone a significant transition from the London Interbank Offered Rates (LIBORs) to Risk Free Rates (RFRs) such as, e.g., the Secured Overnight Financing Rate (SOFR) in the U.S. and the Cash Rate (AONIA) in Australia, as primary benchmark rates for borrowing costs. The paper examines the pricing and hedging method for financial products in a cross-currency framework with the special emph…
In the LIBOR era, banks routinely tied revolving credit facilities to credit-sensitive benchmarks. This study assesses the Across-the-Curve Credit Spread Index (AXI) -- a transparent, transaction-based measure of wholesale bank funding costs -- as a complement to SOFR, summarizing its behavior, construction, and loan-pricing implications. AXI aggregates observable unsecured funding transactions across short- and long…
LIBOR-OIS spread tracks the gap between unsecured bank funding rates and overnight indexed swap rates, historically serving as a benchmark for banking-system stress.
Interbank Offer Rate Legacy — Legacy IBOR benchmarks replaced by RFRs after reform.
SOFR Transition Basis — Spread and convexity differences from LIBOR to SOFR products.
Eurodollar Legacy Futures — Legacy LIBOR STIR futures superseded by SOFR contracts.
Eurodollar Legacy Futures — Legacy LIBOR STIR futures superseded by SOFR contracts.
LIBOR-OIS spread tracks the gap between unsecured bank funding rates and overnight indexed swap rates, historically serving as a benchmark for banking-system stress.
SOFR Transition Basis — Spread and convexity differences from LIBOR to SOFR products.