Benchmark page on our site

One very useful document related to interest rate market is Marc’s “Interest Rate Instruments and Market Conventions Guide". Its latest version was published more than 10 years ago as an OpenGamma Quantitative Research document. It can be found on SSRN at https://ssrn.com/abstract=2128257.

Over that time interval the interest rate market conventions have changed, in particular in relation to benchmarks. We are planning to update the guide and we will post here a link to the new version.

In the mean time we have added a benchmark page on our web site with a list and short descriptions of overnight and IBOR-like benchmarks: https://murisq.blogspot.com/p/conventions.html. We will do our best to maintain it up-to-date.

Don't hesitate to contact us if you think there are "glitches" in the list or to propose new information.

AMERIBOR is also alive!

A couple of days ago, we published a blog titled "SOFR is really alive again!" showing the return of (small) volatility of the SOFR spread above the Target rate. This small volatility was opposed to the dead spread of EFFR.

A natural question at the reading of the blog has been "What about AMERIBOR?".  The third overnight benchmark in the USD market is more directly linked to the actual deposit market without manipulation. 

The spread of AMERIBOR above the target rate is reasonably volatile. A graphical representation is proposed below.

Figure 1: Spread over target rate for three USD overnight benchmarks.

SOFR is really alive again!

In a post titled "Is SOFR alive again?" a couple of month ago, we were wondering if the month-end and mid-month volatility of SOFR was back or if it was only a temporary effect linked to the year-end. The answer seems to be that the month-end effect is really there again but the mid-month effect not.

The effect is represented graphically below. The graphs displays the spreads between the 2 main overnight rates in USD (EFFR and SOFR) and the US Target rate lower end of the range. The EFFR rate does not show any variation at 8 bps every day. The SOFR is usually slightly lower at 6 or 7 bps, but around month-end shows "burst" up to 15 bps.

Figure 1: Spread over target rate for overnight benchmarks.

Over the last 10 months displayed in the above figure, the mean spread for the “rest” bucket is 6.48 bps. For the other periods, we measured the spread above that mean (i.e. spread of spread). The results are

Day of the month	Spread (bps)
1st	3.32
2nd	2.32
15th	-0.10
Last	2.08

The feature should probably be incorporated into the SOFR curve calibration when dealing with large volume of SOFR-linked products (OIS, CSA collateral, SOFR futures, etc.). A mechanisms to incorporate this feature in curve calibration is proposed in Chapter 5 of Marc's multi-curve framework book (note: a new version is in progress).

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Note that CME SOFR term rates do not include this feature in their "interpolation" mechanism. The CME SOFR term rates are probaly not fully suitable for precision hedging of the SOFR risk.

New offices: work (almost) in progress

muRis_Q Advisory is happy to announce the launch of the work on its new offices.

The new offices will be located in the municipality of Namur in a building of the late 19th century. The heavy work will start in October.

The offices will be divided in two parts: a “communication office” and a “research and development office”. The former will be used for client reception and online meetings. The latter will be organised as a library with reading desks and large bookshelves with relevant quantitative finance, mathematics, computer science and economic literature.

We will post pictures of the new premises once the transition is over.

The new office's floor plan