31–40 of 184 posts
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
Mainly 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 le…
While there are rumors of wash tradings on some exchanges, the price at which such trades would be going will be constrained by the larger network, and the risk of triangular trade will limit the possible divergences to a larger spread (instead of going one direction only)
Add enough data, and you may get something that would be almost impossible to trick, simply due to the sheer number of exchanges, and bots that would gladly take the money of those who would try to rig the game.
I 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…
Not sure why you would believe this. It is much harder for regulators to interview employees about their activities when they are no longer centrally located for convenient discussions.
Its the same tactic they use in bury investigators with paperwork but for people.
Earlier quoted context omitted.
So - considering that LIBOR was not an observed number, but a made-up number that was nonetheless useful, what did the LIBOR actually measure?
LIBOR is often part of the formula for calculating loan interest rates. Last time I saw such code it looked something like: LIBOR + bank's minimum interest rate + a rate based on creditworthiness = your offered interest rate Planet Money recently had a really good episode on how some banks are deciding on a replacement rate: https://www.npr.org/2021/10/08/1044598674/libor-pains
When I worked in investment banking, all our debt models were pegged to LIBOR. Rest In Peace! God bless the IB analysts scrambling to plug their models with replacement rates and weird hardcodes!
So - considering that LIBOR was not an observed number, but a made-up number that was nonetheless useful, what did the LIBOR actually measure?
I 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…
Unfortunately 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])
I 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…
>part of the cost cutting measures. Not sure why you would believe this. It is much harder for regulators to interview employees about their activities when they are no longer centrally located for convenient discussions. Its the same tactic they use in bury investigators with paperwork but for people.
It's probably best that the LIBOR system goes in favor of something more transparent. But I have a friend who is involved in the transition at a bank, and it's incredibly complex to move over such a huge mass of contracts to this new thing. Definitely a lot of work for a lot of people.
From 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.