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The post-Libor world: a global view from the BIS derivatives statistics

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  • Wenqian Huang
  • Karamfil Todorov

Abstract

The transition from Libor to "nearly risk-free" rates (RFRs) has led to structural changes that have reshaped the trading and hedging behaviour of participants in fixed income markets. Using the BIS Triennial Survey statistics, we document four major changes in the instrument mix and geographical distribution of the global turnover of OTC interest rate derivatives between 2019 and 2022. First, forward rate agreements (FRAs) became largely obsolete because of reduced fixing risk. This led to a decline in FRA trading, which dragged down overall turnover. Second, trading in swaps referencing RFRs increased. Third, the UK and US shares in global turnover dropped, whereas the share of the euro area rose. Finally, new instruments emerged to manage morphing basis risks in the post-Libor world.

Suggested Citation

  • Wenqian Huang & Karamfil Todorov, 2022. "The post-Libor world: a global view from the BIS derivatives statistics," BIS Quarterly Review, Bank for International Settlements, December.
    • Handle: RePEc:bis:bisqtr:2212e
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    References listed on IDEAS

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    1. Andreas Schrimpf & Vladyslav Sushko, 2019. "Beyond LIBOR: a primer on the new benchmark rates," BIS Quarterly Review, Bank for International Settlements, March.
    2. Robert N McCauley, 2001. "Benchmark tipping in the money and bond markets," BIS Quarterly Review, Bank for International Settlements, March.
    3. Darrell Duffie & Jeremy C. Stein, 2015. "Reforming LIBOR and Other Financial Market Benchmarks," Journal of Economic Perspectives, American Economic Association, vol. 29(2), pages 191-212, Spring.
    4. Torsten Ehlers & Bryan Hardy, 2019. "The evolution of OTC interest rate derivatives markets," BIS Quarterly Review, Bank for International Settlements, December.
    5. François-Louis Michaud & Christian Upper, 2008. "What drives interbank rates? Evidence from the Libor panel," BIS Quarterly Review, Bank for International Settlements, March.
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    Cited by:

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    2. Realdon, Marco, 2024. "The efficiency of the Estr overnight index swap market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).

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    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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