IBOR Transition: Implications of COVID-19 on Spread Adjustments from a Conduct Risk Perspective

By Maximilian Beckmann, Stefan Wingenbach, Peter Woeste Christensen

A featured article of our July 2020 edition of PRMIA's Intelligent Risk quarterly newsletter

ISDA has played the central role in developing the framework to end LIBOR. A long and transparent process has resulted in a seemingly simple approach. The LIBOR benchmark will be replaced by an Adjusted Reference Rate (ARR) plus a fixed Spread Adjustment. Usually, the ARR is the compounded risk-free rate (RFR). The spread adjustment reflects a compensation for risk premiums embedded in LIBOR compared to a risk-free rate.

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Intelligent Risk is PRMIA's quarterly publication, bringing all PRMIA members free access to knowledge and information about risk management for financial institutions as well as current information on PRMIA chapters, committees, academic partners, news and events.

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