LIBOR Transition

With the LIBORs discontinuation, the overnight benchmark changes and the increasing regulatory requirements related to benchmarks, a clear quantitative finance perspective on the impacts for benchmark-linked derivatives is becoming paramount.

Financial institution and end-users of interest rate derivatives face many challenges when navigating through those changes and their impacts. The impacts are far reaching and relate to not only to the legal and operational issues but also to pricing, risk, modelling, validation and implementation in systems.

muRisQ Advisory has an extensive experience related to benchmarks and LIBOR transition. We have published on the subject since more than 5 years and have modeled and implemented the impacts in theory and in practice. We have been guest speaker at major academic and practitioner conferences in the last 5 years (see partial list at the bottom of the page).

We have created a set of introductory videos. Those videos are available on our Youtube channel.
  1. Benchmarks: tenor deposit and overnight (11:32)
  2. Why a transition? (15:01)
  3. Overnight transition: EFFR to SOFR and EONIA to ESTR (21:10)
  4. CCP big bang - EUR (6:32)
  5. CCP big bang - USD (21:42)
  6. IBOR fallback - overview (16:40)
  7. IBOR fallback - adjusted RFR (18:06)
  8. IBOR fallback - spread (17:11)
  9. IBOR fallback - value transfer (17:34)
The videos are at the introductory level for each subject and date back from 2020. A lot more material is available for workshops and advisory engagements. The slides of the videos are available at:

Our libraries include the Fallback Transformers which allow to apply the exact fallback details to actual trades and portfolios. The transformation details include overnight composition, period offset, spread applicable, and discontinuation date. It is suitable for what-if analysis and risk management.

We have also proposed a series of alternative fallbacks for swas, cap/floor, and swaptions. The goal of those alternative fallbacks is to make the live of both counterparties easier through the transition. The standard fallback proposed by ISDA definitions often transform plain vanilla instruments into exotics. It is possible to keep similar methods but to improve them in such a way that only vanilla instruments result from the fallback.

We help institutions in this regards in several ways:

Technical workshops

  • Public workshops. Recent presentations: Quantitative Finance Conference (Rome, 16 October 2019), WBS Interest Rate Reform conference (London, 4 March 2020), Interest Rate Reform (On-Line , July 2020), QuantMinds International (November 2020), Interest Rate Reform (On-Line, February 2021), CEETA conference (Warsaw, Poland, April 2021). CEETA (Warsaw, Poland, 6 September 2021), CQF Institute (London, UK, 6-7 October 2021), WBS Interest Rate reform conference (London, UK, 19-21 October 2021), Quantitative Finance Conference 17-19 November 2021, CEETA (Warsaw, Poland, 20-21 June 2022)
  • In-house tailor-made workshops on the quantitative finance impacts (valuation, risk, value transfer, model validation, new instruments, protocol, bilateral agreements). Typical introductory agenda available on our training page. More quantitative finance in-depth versions can be tailor made to each client.

Independent impact assessment

  • We use our own production grade systems, including Fallback Transformers, developed over the last years
  • Run different hypothesis for fallbacks and spreads on exiting portfolios
  • Analysis of re-papering and protocols impacts, cost of protocol signature
  • Analysis of value transfer on actual portfolios
  • Change of collateral/discounting: CCP and bilateral big bangs.
  • Post-fallback risk analysis
  • Cap/floor on composition (including production grade implementation)
  • Swap rate fallback and alternatives (including production grade implementation)
  • Expert witness

Implementation advisory

  • Support of quantitative analysis and risk groups in implementation (based on more than five years of internally developed research and systems)
  • OIS discounting, transition adjustments
  • New models development
  • Senior stakeholder support
  • New exchange traded products development
  • Alternatives to standard fallback procedures
  • Reduction of existing exposure
  • Support for negotiation with counterparties
  • Dispute support

Some References:

  •  Swap Rate fallback: unreasonable effectiveness of approximations and alternatives. February 2022. Accepted for publication in Wilmott magazine. Available at SSRN:
  • Swap Rate: cash settled swaptions in the fallback. September 2021. Accepted for publication in Risk.
  • Derivative pricing with two collateral rates. Model Development, muRisQ Advisory. February 2021. Available at SSRN:
  • Description of overnight floaters with principal adjustment and its advantages. Market infrastructure analysis, muRisQ Advisory, December 2020. Available at
  • CCP discounting big bang: convexity adjustment. Risk.Net. Published online 18 September 2020. Available at (subscription required): Appeared in October 2020 paper edition
  • Piterbarg, V., Interest Rates Benchmark Reform and Options Markets (February 14, 2020). Available at SSRN:
  • Henrard, M., Discounting Transition: Big Bang Impacts (February 2, 2020). Market Infrastructure Analysis, muRisQ Advisory, February 2020. Available at SSRN:
  • Turfus, C., Caplet Pricing with Backward-Looking Rates (January 1, 2020). Available at SSRN:
  • Lyashenko, Andrei and Mercurio, Fabio, Looking Forward to Backward-Looking Rates: Completing the Generalized Forward Market Model (November 6, 2019). Available at SSRN:
  • Henrard, M., LIBOR: Don't fallback, step forward. Wilmott Magazine, 2019 (104): 24–-35, November 2019.
  • Henrard, M., Answer to 'Consultation on Final Parameters for the Spread and Term Adjustments in Derivatives Fallbacks for Key IBORs' Issued by ISDA (October 22, 2019). Market Infrastructure Analysis, muRisQ Advisory, October 2019. Available at SSRN: 
  • Henrard, M. SOFR Discounting Transition: Multi-Curve and Quantitative Perspective (October 28, 2019). Market Infrastructure Analysis, muRisQ Advisory, October 2019. Available at SSRN:
  • Henrard, M. LIBOR fallback and quantitative finance. Risks, 7(88), August 2019. Open Access article available at
  • Lyashenko, A. and Mercurio, F. (2019). Libor replacement: a modelling framework for in-arrears term rates. Published online 14 June 2019. Preprint at SSRN: (February 6, 2019)
  • Henrard, M., A Quant Perspective on IBOR Fallback Consultation Results (January 1, 2019). Market Infrastructure Analysis, muRisQ Advisory, January 2019. Available at SSRN: 
  • LIBOR Fallback transformers! Market Infrastructure blog, muRisQ Advisory, October 2018.
    Available at

Our LIBOR transition expertise has been recognized by the market as documented from the invitations to many practitioner and academic finance conferences and seminars. Marc has been invited as workshop lecturer, guest speaker or expert panelist at the following events: