Fixing the Fixings: What Road to a More Representative Money Market Benchmark?

By V. Brousseau, Alexandre Chailloux, Alain Durré

May 29, 2013

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V. Brousseau, Alexandre Chailloux, and Alain Durré. Fixing the Fixings: What Road to a More Representative Money Market Benchmark?, (USA: International Monetary Fund, 2013) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Interest rate derivatives on major currencies, with notional outstanding amounts adding up to hundreds of trillions, are mostly indexed on Libor and Euribor benchmarks, as are hundreds of billions in loans to enterprises, mortgages and other retail loans to the real economy. Yet, the prevailing role of these benchmarks appears to be more a legacy from history rather than reflecting today?s structure of banks? funding. Building on earlier work (Brousseau, Chailloux, Durré, 2009), this paper discusses various options to move towards a new benchmarking system in the money market. It proposes a more ambitious benchmark design that would consist of a trade-weighted index that would systematically pool all short-term wholesale funding operations of banks per tenor.

Subject: Banking, Currencies, Deposit rates, Financial institutions, Financial markets, Financial services, Interbank rates, Money, Money markets, Options

Keywords: Asia and Pacific, Bank, Benchmarking System, Currencies, Deposit rates, Derivative instrument, Derivatives data, Euribor, Euribor-index interest rate swap, Europe, Fixings, Forward rate, Global, Index cash transaction, Interbank rates, Interest rate, Interest rate swap, Libor, London interbank offered rate, Market, Market participant, Money markets, North America, Northern Europe, Options, OTC derivative clearing houses, OTC interest rates derivative exposure, Rate derivatives instruments, Rate-indexed derivatives contract, Rate-referenced derivative products, Trading unit, Unsecured Money Market, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2013/131
Stock No:

WPIEA2013131
ISBN:

9781484306772
ISSN:

1018-5941

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