On June 30, 2023, the cessation of the USD LIBOR will mark the next milestone in the global standard implementation for floating interest rates - the "Risk-Free Rates".
RFR-denominated debt and derivatives are currently available in Fairways Debt for loans, swaps, caps and floors. RFRs for collars will be available at a later date.
The available indexes for each currency are as follows:
- EUR: EURIBOR, ESTER
- GBP: SONIA
- USD: (LIBOR), SOFR, Fed Funds
- CHF: SARON
Advanced options have been added for RFRs to allow you to apply a cap and/or floor to the daily rates when editing the transaction indexation. These new options are only displayed when the interest amount is calculated using either the compounded method or the average one.
In addition, you can add a spread to the daily rate before the cap and/or floor is applied, and then add a daily margin. As before, you can also set a global spread, cap and floor for the whole period.
Important: Valuation approximation! These daily spreads/caps/floors/margins are only applied to past fixings (past flows and accrual ones). They are not used to calculate forward rates (no option value). However, they are applied to period forwards to avoid valuation gaps.
See Apply Advanced Indexation to a Transaction for more details.