I was wondering what the impacts of Interest Rates benchmarks (LIBOR/EURIBOR) discontinuation might be on the Quants side ? Do you know if there are articles/discussions providing an analysis grid of potential impacts (discounting, swap/options pricing, VaR time series, ...) Thanks in advance
There's a paper providing formal arguments why OIS rates should be favored over LIBOR as risk-free benchmarks for derivatives pricing: Hull and White (2013).
In the US, the clearing houses have announced a new swap contract which is a fixed rate versus SOFR, which is a repo based rate that will be observed and compounded daily, paid probably annually or perhaps quarterly. Thus raises a number of quant type issues: (1) daily projection of SOFR will be required , as opposed to quarterly projection in today's Libor swaps. (2) discounting is yet to be decided, but some contracts will be discounted at FedFunds whilst others could be discounted at SOFR. (3). There's not yet any data series for SOFR based swaps, so there's no historical volatility to help price SOFR swaptions, and no data series to calculate Var. As SOFR swaps gain liquidity, presumably this will gradually be solved.