Products
Benchmark Rates
Benchmark rates such as TONA, TIBOR and SOFR, compounding in arrears, and the transition away from LIBOR.
Introductory6 pagesPractitioner4 pages
1Major Benchmark Rates
- IntroductoryWhat Is a Benchmark Rate?Many financial transactions use benchmark rates as reference rates, and the amount of floating-rate interest depends on the value of the benchmark rate referenced.
- IntroductoryTONATONA is a rate for borrowing and lending for a single day, and it has been selected as the yen RFR (risk-free rate).
- PractitionerTORFBecause TORF is derived from the fixed rate of OIS that reference TONA, the rate is set at the start of the period and contains almost no bank credit risk.
- IntroductoryTIBORTIBOR is a term rate that includes bank credit risk, and its value is set before the interest period begins.
- IntroductorySOFRSOFR is calculated from three types of repo transactions combined, namely tri-party repo, GCF Repo and DVP repo.
- Introductory€STR and SONIAEach rate is calculated and published by a central bank itself, €STR by the ECB and SONIA by the Bank of England.
2Compounding in Arrears
- PractitionerCompounding in ArrearsThe rate compounded in arrears annualizes the growth from reinvesting overnight funds every day together with the interest, and it is set at the end of the period.
- PractitionerLookback, Lockout and Payment DelayWith a five-business-day lookback, the rate is known five business days before the end of the period.
3The Transition from LIBOR
- IntroductoryThe Transition from LIBORLIBOR was a benchmark rate built from the unsecured borrowing rates that panel banks submitted, and it was published in 5 currencies and 7 tenors.
- PractitionerFallbacks and Spread AdjustmentsA fallback provision sets out three things, namely the conditions for the switch (triggers), the successor rate, and the procedure for adding the provision to contracts.