Recently Monetary Authority of Singapore (MAS) raps banks in rate-rigging. This is nothing new, LIBOR was also manupulated before, by some "major" banks.
however, before the censorship, did any "minor" bank declare that the interest rate from LIBOR is distorted?
seems modellers always assume the market is right, so models, or parameters used in the model are always first calibrated according to the market, then used to price products.
so even there is a problem, people will try to find some work-around. for example if the term structure leds to a negative future rate, the curve is still accepted.
is there some mechanism to detect such abnormality and flag "market is wrong" ?