The continuing central bank global push for the transitioning from interbank offered rates (IBORs) to a new set of Alternative Reference Rates (ARRs) also known as Risk-Free-Rates (RFRs) is being driven by regulators around the globe such as the Federal Reserve Bank of New York and the Bank of England. Other influential industry groups such as the International Swaps and Derivatives Association (ISDA) and the Alternative Reference Rates Committee (ARRC) continue to publish and comment on this topic.
IBOR is an interest rate based on quotes from banks on how much it would cost to borrow money from each other. Attempts by banks to rig the 50-year old benchmark denominated in sterling, yen, Swiss franc, dollar and euro, prompted regulators to call time on it and replace them with Alternative Reference Rates (ARR)
The London Interbank Offered Rate (LIBOR) was at the time, the most widely quoted IBOR rate. It was quoted across 5 currencies USD, GBP, CHF, JPY and EUR.
GBP, CHF, JPY and EUR all ceased to be published after the 31st December 2021 with USD remaining until the 30th June 2023.
These ARRs are intended to provide a more robust benchmark and serve as a more credible measurement of short term risk free borrowing. They are based on collateralizations including secured overnight repo rates in USD SOFR, and CHF SARON as well as unsecured overnight depo rates GBP SONIA, JPY TONA and EUR ESTR.
TraditionDATA Alternative Reference Rate (ARR) Summary
TraditionDATA Alternative Reference Rate (ARR) Summary.pdf