Explain the risks to the financial system that may arise from the transition away from LIBOR
Homework Answers
LIBOR is the London Interbank Offered Rate. In financial system, retail Mortgages, real estate loans and hedging are currently done with a reference to LIBOR. However, after the global financial crisis, banks have the view that LIBOR is not the best rate for short-term financing. Transition to other rate will require huge investment not only in terms of money but also in terms of effort. The major risk will be to calculate the spread adjustment and the establish a forward looking term rate.
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Explain the risks to the financial system that may arise from the
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