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Libor, long the most important number in finance, dies at 52

nytimes.com

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Re: Libor, long the most important number in finance, dies at 52

#51

Post by kaesar14 »

fanzhang wrote: post #45

When I first heard about LIBOR in 2002, I was surprised that the number is just based on a survey of bankers. Surely there would be accuracy issues with that? But at that time I was young and had no finance experience, so though that the adults in the room knew best. Turns out not! I don't think the base problem is that people shaded their numbers one way or another, it's that the system is designed wrong.

This was also my impression learning about it as I was starting to learn about global finance in high school. Even them it seemed ridiculous. I wonder how many more systems currently in place are based on such foolish promises and easily exploited foundations of trust.

Re: Libor, long the most important number in finance, dies at 52

#52

Post by tomc1985 »

fennecfoxen wrote: post #34
tomc1985 wrote: post #20

Earlier quoted context omitted.

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

That's not what it's measuring, that's how it's used.

It measures the backroom sensitivities of the cabal of bankers that set it, judging by recent news releases

Re: Libor, long the most important number in finance, dies at 52

#53

Post by tomc1985 »

marginalia_nu wrote: post #31
tomc1985 wrote: post #18

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

Having worked in fintech, I assume everyone ignored all signs toward this coming, assumed it would be postponed forever, and then collectively burst into a choir of "LIBOR gone? Inconceivable!"

Yup! I remember hearing murmurs of LIBOR's unsuitability but didn't see much of a reaction. Wonder how things are now

Re: Libor, long the most important number in finance, dies at 52

#55

Post by mhh__ »

svnpenn wrote: post #40
erwincoumans wrote: post #27

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.

Yeah this just screams clickbait. "Let's create a title that makes no sense, followed by an entire article with a strained metaphor".

How is it clickbait? LIBOR is omnipresent in finance and it is being killed. Sterling LIBOR is already dead for example.

Re: Libor, long the most important number in finance, dies at 52

#56

Post by splittingTimes »

lordnacho wrote: post #39

I traded LIBOR instruments that were probably manipulated, and there was suspicion at the time. Same with FX, there was a cartel manipulating that as well, and people in my firm also wondered at times why things were moving around at the exact wrong time. 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 incr…

The Libor - interest rates scandal is only one in a long list of documented manipulations in the last 5-10 years

ISDAfix - swaps

Platts - oil prices

WM/Reuters - FX

High-Frequency Trading - equities

Commodities - Gold, Silver Stock indices

Are all rigged. With that history, how can we give that new system the benefit of a doubt. It will be gamed as well.

Re: Libor, long the most important number in finance, dies at 52

#57

Post by javajosh »

hardtke wrote: post #6

I 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.

Why is this purely up to the lender? And if it is, of course they'll add something. You can't have individuals borrowing money interest free now, can we? (Institutions...that's more than fine, its expected.)

Re: Libor, long the most important number in finance, dies at 52

#58

Post by throwmeaway666 »

decafninja wrote: post #23

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…

>we were part of the cost cutting measures. >the event that lead to my eyes being opened to the world of Silicon Valley tech companies

I found that being aware of whether you will be part of the cost center or profit center in a company is very useful when deciding where you should work.

Re: Libor, long the most important number in finance, dies at 52

#59

Post by yufeng66 »

hardtke wrote: post #6

I 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.

legally the new definition of 3 month Libor is sofr + 26.161bps

Re: Libor, long the most important number in finance, dies at 52

#60

Post by outside1234 »

erwincoumans wrote: post #27

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.

It is a literary device to make a very boring topic interesting for mainstream readers.
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