Darrell Duffie in NYC – An Auction-and-Protocol Approach to Converting Legacy LIBOR Contracts to New Reference Rates
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Financial Engineering Practitioners Seminar
This event will be available via live stream as well as through a recording. To watch the live stream, please CLICK HERE
This presentation will discuss an auction-based approach to obtaining the price discovery necessary to robustly convert legacy LIBOR financial instruments to a new reference rate, such as the overnight Broad Treasury Financing Rate (BTFR). In a double auction, bidders on both sides of the market (those paying and receiving LIBOR) will bid the fixed spread over BTFR that they are willing to pay or receive, respectively, when substitute LIBOR with BTFR. The market-clearing conversion spread determined in the auctions, for each of a standard list of maturities, will also be applied in a protocol-based process for those pairs of counterparties that volunteer to convert their contracts by protocol. The presentation will discuss some open design features to be determined, including how to mitigate free-ridership and manipulation. Suggestions will then be solicited from those attending.
This seminar is in partnership between Global Risk Institute and Industrial Engineering and Operations Research at Columbia University.
This seminar is also part of the Quantitative Finance Weekly Seminar series with Columbia Business School, NYU Tandon School of Finance and Risk Engineering, NYU Courant Institute of Mathematical Sciences, Bloomberg LP and the International Association of Quantitative Finance (IAQF).
Darrell Duffie is the Dean Witter Distinguished Professor of Finance at Stanford University’s Graduate School of Business, and Professor (by courtesy) in the Department of Economics, Stanford University. He is a Fellow and member of the Council of the Econometric Society, a Research Fellow of the National Bureau of Economic Research, a Fellow of the American Academy of Arts and Sciences, and a member of the board of directors of Moody’s Corporation. Mr. Duffie was the 2009 president of the American Finance Association, and in 2014 chaired the Financial Stability Board’s Market Participants Group on Reference Rate Reform. His recent books include How Big Banks Fail (Princeton University Press, 2010), Measuring Corporate Default Risk (Oxford University Press, 2011), and Dark Markets (Princeton University Press, 2012).