arXiv Open Access 2022

Decomposing LIBOR in Transition: Evidence from the Futures Markets

David Skovmand Jacob Bjerre Skov

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Abstrak

Applying historical data from the USD LIBOR transition period, we estimate a joint model for SOFR, Fed Funds, and Eurodollar futures rates as well as spot USD LIBOR and term repo rates. The framework endogenously models basis spreads between each of the benchmark rates and allows for the decomposition of spreads. Modelling the LIBOR-OIS spread as credit and funding-liquidity roll-over risk, we find that the spike in the LIBOR-OIS spread during the onset of COVID-19 was mainly due to credit risk, while on average credit and funding-liquidity risk contribute equally to the spread.

Topik & Kata Kunci

q-fin.GN q-fin.ST

Penulis (2)

David Skovmand

Jacob Bjerre Skov

Format Sitasi

APA MLA BibTeX

Skovmand, D., Skov, J.B. (2022). Decomposing LIBOR in Transition: Evidence from the Futures Markets. https://arxiv.org/abs/2201.06930

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Informasi Jurnal

Tahun Terbit: 2022
Bahasa: en
Sumber Database: arXiv
Akses: Open Access ✓