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SARON hedging strategies

Hedging of SARON exposure, Part II

On 5 March 2021, the Financial Conduct Authority (FCA) announced the official dates of the cessation and loss of representativeness of the LIBOR rates. As a result, 31 December 2021 will be the last day on which the CHF LIBOR will be published. During the last months, a multitude of informative documents were provided by the Alternative Reference Rates Committee (ARRC) and the International Swaps and Derivatives Association (ISDA). As a follow-up from the previous article Hedging of SARON exposure, Part I: Explanatory power of SARON term and actual rates, this article assesses the different compounding methodologies with respect to hedging strategy.

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Impact of OIS switch of fair value derivatives

Barely a day goes by, it seems, without an email, a post, or a newsflash from one of the many acronyms (ECB, BOE, FED, FCA, ISDA…) of the LIBOR reform players. We are getting closer to the deadline and there is still the same uncertainty on what the post-LIBOR market will be like. What will the transition look like? Will my margin calls be impacted? Will the fixed rate currently paid be changed? Will interest payment in arrears really become the norm for the loans and facilities too?

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Fallback provisions as safety net

IBOR Reform in Switzerland, Part IV

The Swiss Average Rate Overnight (SARON) is expected to replace CHF LIBOR by the end of 2021. The transition to this new reference rate includes debates concerning the alternative methodologies for compounding SARON. This article addresses the challenges associated with the fallback provisions.

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Compounded SARON and Swiss Market Development

IBOR Reform in Switzerland, Part III

The Swiss Average Rate Overnight (SARON) is expected to replace CHF LIBOR by the end of 2021. The transition to this new reference rate includes debates concerning the alternative methodologies for compounding SARON. This article aims to provide the latest updates on the Swiss National Working Group’s (NWG) view and latest market development on compounded SARON.

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Calculation of compounded SARON

IBOR Reform in Switzerland, Part II

The Swiss Average Rate Overnight (SARON) is expected to replace CHF LIBOR by the end of 2021. The transition to this new reference rate includes debates concerning the alternative methodologies for compounding SARON. This article addresses the challenges associated with the compounding alternatives.

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