Workshop - From IBOR to Risk Free Rates

Workshop - From IBOR to Risk Free Rates

From IBOR to Risk Free Rates

June 1, Tokyo





Overview of IBOR to risk free rates and benchmark options

  • Context - financial markets affected
  • The wider benchmark reform agenda
  • ARR methodologies / jurisdictions
  • O/N looking RFR vs. Term RFR 
  • Term structures
  • The challenges of transitioning to ARRs


Morning break


How to deal with the transition

  • Client-centric approach - communication and preparation.
  • The complexity of Asian markets (Developed, emerging)
  • Conduct and reputational risks in the preparation and the transition itself
  • Legal risk - the challenge of fallbacks basis risks for new and legacy portfolios
  • Multi risk-free rates - what's in for whom? 
  • Expect disruption - Funding and market timelines
  • Forward vs in arrears - product opportunities and challenges 
  • Right budgeting and project governance
  • IBOR transition fallback language overview and implementation considerations

Impact on risk management and risk control

  • Overnight RFR's vs Term Rates - key technicals
  • Risk Appetite Framework, thresholds reviews and strategies check-up
  • Curve structure changes
  • Margin trends across different currencies
  • Liquidity at Risk for your assets, derivatives, collateral and off balance sheet exposures
  • Basis risk and cross-currency risk management
  • Funding blocks, key inflexion points and FTP overhaul
  • Regulatory cross-impacts and tax surprises - the hidden risks 
  • Dynamic business partner - the Early Warning Indicators to support business lines and legal entities




Accounting implications

  • Hedge accounting relationships
  • Fair value hedging 
  • Discounting/ valuations
  • Cashflow hedging 
  • Modification accounting

Operational preparation and transition checklist 

  • Building the capabilities for the new RFR
  • Checking your IT systems what needs to be considered?
  • Operational risks
  • Data and technology implications
  • Minimising the cost impact of the transition


Afternoon networking break


Fallback provisions 

  • The scope of potential fallback provisions
  • Identify IBOR inventory
  • If the RFR is not liquid
  • Contractual fallback language
  • Flexible fallback provisions 
  • Fallback provisions for securitisation

IBOR transition across Derivatives and Cash markets: next steps & challenges

  • Towards a transition step by step
  • Modelling impacts and hedging questions
  • Cessation triggers & Fallbacks: squaring the circle?
  • Open questions for Risk, Accounting, XVA


End of training course