The LIBOR Transition - A Deep-Dive Series

The LIBOR Transition - A Deep-Dive Series
Complimentary Webinar: Part 1: The LIBOR Discounting Transition Lessons learned from July’s EONIA to ESTR discounting transition in Europe are applied to the upcoming Fed Funds to SOFR transformation. Key considerations include convexity corrections, optionality, and compensation to remediate P&L and risk.

Presented By:
Jonathan Schachter, PhD, Arrayo
Jean-Philippe Michel, Arrayo

October 6, 2020

11:00 a.m. - 12:00 p.m. EDT
4:00 p.m. - 5:00 p.m. BST

Session Length:
60 minutes


About this Webinar  

The next 14 months are a critical time for transforming trillions of dollars of global financial products, ranging from mortgages to loans to swaps and bonds and more, to “risk-free rates” (RFRs).  In the wake of the Great Financial Crisis, the legacy London Interbank Offered Rate (LIBOR) is now seen as easy to manipulate, subjective, and not risk free.  This can be viewed at LIBOR’s end for the major currencies:  USD, EUR, GBP, CHF, and JPY.  It was in some sense on life support already, as Credit Support Agreements during the Crisis switched from using LIBOR discounting instead to less risky overnight-index swap rates.  

T­­his talk starts with the historical background on LIBOR, which served for many years, and some players are regretfully giving up.  The quant framework for the upcoming changes is described, including the development of tenor (1M, 3M, etc.) indexes from native overnight RFRs. 

The focus is on modifications to discounting, starting with lessons learned from the EONIA to ESTR transition in July.  Seemingly simple to consider, discounting introduces unexpected convexity even in vanilla instruments, and optionality creates additional complications. 

The upcoming Fed Funds to SOFR discounting change will have far greater impact.    The prospect of re-aligning both the numerator and denominator of cash flows with the same basic stochastic interest-rate process is alluring, and will increase analytical tractability when LIBOR sunsets on 12/31/2021.



 Jonathan Schachter is a quantitative analyst with Arrayo, a boutique finance data and analytics consultancy.  He has 20 years of Wall Street experience, including positions at Goldman Sachs, Morgan Stanley, State Street, and the financial institution practice of Deloitte and Touche. Since 2010, he has focused on learning the lessons of the Great Financial Crisis, working on the Lehman bankruptcy, the London Whale episode at JP Morgan, and the tightening of standards for risk in mathematical models used in finance (e.g., Federal Reserve Board SR 11-7).  Prior to entering Wall Street in 2000, Jonathan was a research associate in the Harvard astronomy department for 10 years, and a team member on the 1999 launch of the Chandra X-ray Observatory on Space Shuttle Columbia. 

Jonathan received his A.B. in physics from Princeton, his Ph.D. in physics from the University of California at Berkeley, and his M.A. in financial mathematics from Columbia.

At Arrayo for a year and a half, Jonathan is a subject-matter expert on the LIBOR transition for global banks.  He has given talks and guest-lectured in the New York City area at Columbia, Cornell, and Fordham, Stevens Tech, and at IAQF. A frequent contributor to LinkedIn on regulatory quant matters, including founding the Regulatory Quant discussion group, he tweets as @regquant. He lives in Brooklyn with two sons, two cats, and an inspirational 92-year old father with a long past career in cellular physiology and biophysics.

    Jean-Philippe Michel is the EVP and Head of Business Development for Arrayo. He is one of the company’s owners and founders. Jean-Philippe has more than 15 years of experience working as a Business Developer, Sales Manager and Executive; with 13 of those years in the professional services industry.

Jean-Philippe has robust operational experience in service development and a proven track record as a successful business leader. He is an expert in developing business and creating solutions for large corporate customers. He was the main driver for his previous ventures’ growth and success in Belgium and France. In 2015, he moved to the United States with an idea and a dream, which led to the co-founding of Arrayo and its sustained success from scratch. He has been responsible for the New York office and Financial Services team since then.

Jean-Philippe graduated from the Université of Namur (Facultés Universitaires Notre-Dame de la Paix, Belgium) with a Master’s in Management. He also spent time studying at Saint John’s University (Queens, NY) in 2002-2003. He is multilingual and is experienced working in an international context. He was born in Boston, MA and spent most of his life in Belgium, travelling to the US on a regular basis. He came back to the US in 2015 with his wife and children where he now lives in Brooklyn, NY.


  Thank You To Our Sponsor  


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10/6/2020 11:00 AM - 12:00 PM
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