Fixing the Fixings: What Road to a More Representative Money Market Benchmark?

Author/Editor:

V. Brousseau ; Alexandre Chailloux ; Alain Durré

Publication Date:

May 29, 2013

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Interest rate derivatives on major currencies, with notional outstanding amounts adding up to hundreds of trillions, are mostly indexed on Libor and Euribor benchmarks, as are hundreds of billions in loans to enterprises, mortgages and other retail loans to the real economy. Yet, the prevailing role of these benchmarks appears to be more a legacy from history rather than reflecting today?s structure of banks? funding. Building on earlier work (Brousseau, Chailloux, Durré, 2009), this paper discusses various options to move towards a new benchmarking system in the money market. It proposes a more ambitious benchmark design that would consist of a trade-weighted index that would systematically pool all short-term wholesale funding operations of banks per tenor.

Series:

Working Paper No. 2013/131

Subject:

Banking Currencies Deposit rates Financial institutions Financial markets Financial services Interbank rates Money Money markets Options

English

Publication Date:

May 29, 2013

ISBN/ISSN:

9781484306772/1018-5941

Stock No:

WPIEA2013131

Pages:

22

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