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By François MASQUELIER, Chairman of ATEL – Luxembourg
By end of 2021 the latest, the market will have faced the transition. What does the move to a new risk-free rate mean for corporate treasurers in practice? Besides what seems to be just a switch to another reference rate, there are some technical issues I personally cannot answer to. The main issue comes from the way the rates are fixed. LIBOR is currently published for each of the 5 LIBOR currencies for specified interest periods at the beginning of those periods (e.g. 1 week, 2 weeks, 1 month, 3 months, …).
It is intended to measure the funding costs of banks and embeds both a term and a credit spread to compensate for the credit risk of lending to another bank on a term...
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