FE Practitioners Seminar: Darrell Duffie

October 24, 2017 | 6:00pm - 7:00pm

FE Practitioners Seminar: Darrell Duffie

Manhattan Institute of Management - 110 William St., New York, 3rd Floor

Title: An auction-and-protocol approach to converting legacy LIBOR contracts to new reference rates


Abstract: This presentation will discuss an auction-based approach to obtaining the price discovery necessary to robustly convert legacy LIBOR financial instruments to a new reference rate, such as the overnight Broad Treasury Financing Rate (BTFR). In a double auction, bidders on both sides of the market (those paying and receiving LIBOR) will bid the fixed spread over BTFR that they are willing to pay or receive, respectively, when substitute LIBOR with BTFR. The market-clearing conversion spread determined in the auctions, for each of a standard list of maturities, will also be applied in a protocol-based process for those pairs of counterparties that volunteer to convert their contracts by protocol. The presentation will discuss some open design features to be determined, including how to mitigate free-ridership and manipulation.


Bios: Darrell Duffie is the Dean Witter Distinguished Professor of Finance at Stanford University’s Graduate School of Business, and Professor (by courtesy) in the Department of Economics, Stanford University. He is a Fellow and member of the Council of the Econometric Society, a Research Fellow of the National Bureau of Economic Research, a Fellow of the American Academy of Arts and Sciences, and a member of the board of directors of Moody’s Corporation. Mr. Duffie was the 2009 president of the American Finance Association, and in 2014 chaired the Financial Stability Board’s Market Participants Group on Reference Rate Reform. His recent books include How Big Banks Fail (Princeton University Press, 2010), Measuring Corporate Default Risk (Oxford University Press, 2011), and Dark Markets (Princeton University Press, 2012).




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