Man I'm glad I don't work for a fintech right now, there's a lot of very complicated code with LIBOR as an input
Think about all the job security. You'll be set for many years!
Chaos is a ladder. Run towards it to prosper.
Libor, long the most important number in finance, dies at 52
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Re: Libor, long the most important number in finance, dies at 52
#22Unfortunately the replacement of SOFR is a collateralized rate where as LIBOR is non-collateralized. Adoption of SOFR has been slow because its not 1:1. Plus, LIBOR is not dead yet, still a lot of contracts that need to go through maturity before the rate truly dies. Interesting history on LIBOR, was created related to an Iran loan in the 1960s. Doesnt seem that long ago but that is pushing 50 years now. Imagine appl…
The other difference is that LIBOR is a forward-looking rate, whereas SOFR (unless you have Term SOFR) is a backward looking rate (i.e. that is for LIBOR you know at the start of the month what rate you will pay for the following month, whereas with SOFR you don't know the rate until the end of the interest period [or 5 days before in the case of lookback])
Re: Libor, long the most important number in finance, dies at 52
#23I was working at an investment bank (as a developer) when this scandal hit. My entire department was laid off as a result. Not because we were involved or complicit in the scandal, but because the scandal indirectly caused a big financial hit to the bank and we were part of the cost cutting measures.
It was a traumatic and tragic moment for me at the time. But in hindsight it was the event that lead to my eyes being opened to the world of Silicon Valley tech companies. Until then, I had naively thought that working as a developer in the IT departments of Wall Street investment banks and hedge funds* was the pinnacle of a SWE career.
* Not referring to places like Citadel or Jane Street or Two Sigma, etc.
Re: Libor, long the most important number in finance, dies at 52
#24Quote from earlier linked article explaining why it took so long after the scandal to do this:
> The transition to a post-Libor world would not be painless. Remember those $190 trillion of Libor-linked derivatives? Hardly any of those instruments — essentially contracts between two parties — provide a workable option for what to do if Libor were to vanish.
> In a worst-case scenario, banks and their customers would effectively have to negotiate how to end Libor-based contracts over the phone, said Darrell Duffie, a Stanford University finance professor. For a sense of what is at stake, Lehman Brothers was a party to more than 900,000 derivatives contracts when it went bankrupt in 2008, according to research published by the Federal Reserve Bank of New York.
> “It’ll be really nasty in terms of costly, difficult workouts,” he said.
The Most Important Number in Finance Is Going Away. Wall St. Isn’t Prepared.
Re: Libor, long the most important number in finance, dies at 52
#25Mainly was LIBOR used in the EuroDollar market? Anyways, it seems like there is a need for a system that is transparent, immutable, and accessible to everyone... Crypto? Matt Damon is calling. Cheers
I worked at a European bank ten years ago, and libor was at least one leg of effectively every product offered.
Interest rate swaps, credit, loans, fixed income, exotic derivatives, CDO, whatever.
You have to hedge the interest rate risk somewhere or get stuck with huge collateral requirements/XVA.
Cryptocurrencies don't solve the problem since they're largely traded on opaque exchanges and other l2 solutions even less trustworthy than the libor cartel.
Re: Libor, long the most important number in finance, dies at 52
#26Man I'm glad I don't work for a fintech right now, there's a lot of very complicated code with LIBOR as an input
They've had years.
Re: Libor, long the most important number in finance, dies at 52
#27From the title it seems like Mr. or Dr. Libor died. For a paragraph, it is cute to have Libor personified. Doing it until the end of the story feels a bit artificial to me.
Re: Libor, long the most important number in finance, dies at 52
#28[deleted]
Re: Libor, long the most important number in finance, dies at 52
#29I have an adjustable rate mortgage based on LIBOR and the lender still has not said what they plan to do. The presumed replacement rate (SOFR) seems to be pegged near 0% which would be good.
Yeah there will be a spread, won’t go from LIBOR+0 to SOFR+0, but to SOFR+0.20% for example
Re: Libor, long the most important number in finance, dies at 52
#30No post body was provided.