Risk.net
Libor to Sonia – If not now, when?
10 Feb 2021
By Andy Ross, chief executive, CurveGlobal Markets
At the end of this year, Libor will cease to exist. It is no longer about getting ready – it’s about
being ready. If we think of Libor as an ‘approaching storm’, the potential for disruption is great. If you heard a large storm coming, would you wait until you were in the centre of it to take precautions? It’s no different for futures market participants and their derivatives portfolios with the end of Libor already clearly on the horizon.
While it may make sense to hold on to your current positions tied with the old benchmark at the moment – whether they’re yielding a profit or to minimise losses – you run serious risks to your business model by not transitioning to new risk-free reference rates (RFRs). The markets that underpin Libor are no longer liquid, which has led to the reliance on so-called ‘expert judgement’ rather than actual transacti