This course covers the LIBOR transition and its purpose is to give practitioners a comprehensive, in some areas deep and always practical information to the topic. The two instructors have over 60 years of combined experience in Fixed Income and Interest Rate Derivative Sales and Trading firms on Wall Street. In the past 18 months they have overseen the transition of half a dozen major financial institutions from LIBORto the new risk-free-rates.

With the LIBORtransition, the new SOFR curve that will replace USDLIBORhas new conventions and features. It is important for people in the market to be exposed and understand these new conventions. Much of this information is not taught in college and graduate school as it's directly used in the markets and trickles down from large banks and regulators down to lower tier institutions. The transition from LIBOR to alternative risk-free rates covers over $300 trillion in loans, cash fixed income instruments and derivatives.

This course is applicable to traders, portfolio managers, risk managers, quants, consultants, advanced business analysts and graduate and undergraduate students. We have kept the material as up to date and as detailed as possible without disclosing any proprietary information. We sincerely hope that this material is useful for you and your institution.

The course currently consists of the following six lectures and we expect that new lectures will be added periodically in 2022.

1) Overview of LIBOR and how we got here

• Foundational challenges with LIBOR as a RFR benchmark

• Macroeconomic dynamics of RFR choice

• Global vs. country and regional challenges

• Chronology of regulatory statements and actions

2) Interest rate fundamentals

• Determinants of interest rates and expectations

• US Treasury debt, markets and explosion of the balance sheet

• Why are RFRs critical for capital markets

• Time value of money and compounding methodologies

• Relationship between spot rates, forward rates and discount factors

• Widely-used RFRs around the world

3) Mechanisms of the Transition Fallback and its ISDA Adjustment

• Fallback trigger definition in the original ISDA 2006 document

• Scope of currencies and indices that have fallbacks

• Routes for banks to transform current LIBOR portfolios

• Relationship among pre-cessation, announcement, and trigger dates

• Detailed fallback calculation algorithm

• Differences and similarities between Fed Funds and SOFR

• Most useful RFR Bloomberg tickers and Bloomberg function

4) Hands-on new payment and accrual conventions for FRN and swaps for reconciliations

• Differences among 1M SOFR, 3M SOFR, Eurodollar and Fed Fund future

• Reasons for calculation differences

• Differences of payment and accrual conventions among fixed income, lending and derivatives

• Listing of reliable rate calculation engines for reconciliation of payments

• Detailed examples of payment gap, lockout, observation shift and observation period shift

5) Build the short end of the USDSOFR curve and introduction to the Cross-Currency basis

• Instruments to define LIBOR, RFR, OIS curves and their relationships

• Interest rate parity for FX forwards and if RFR will have an impact on FX projections

• Impact of RFR on the cross currency basis in the short end of the curve

• Implementation of the short end of the curve and implied likelihood of Fed rate changes

• Multiple different overlapping futures contracts in a single curve

• SOFR term rate and futures

6) Build the long end of the USDSOFR curve

• Many alternatives to build the long end of the curve

• Removal of LIBOR dependency on the SOFR curve

• Necessity for multi-curve bootstrapping when SOFR swap discounts on SOFR

• Swap rate interpolation to build synthetic swaps

• Impact of cross-currency basis by the new SOFR curve in USD

Here are the abbreviated bios of the lecturers.

Sanjay Sharma

During 2007-16 Sanjay was the Chief Risk Officer of Global Arbitrage and Trading Group and Managing Director in Fixed Income and Currencies Risk Management at RBC Capital Markets in New York. His career in the financial services industry spans over two decades during which he has held investment banking and risk management positions at Goldman Sachs, Merrill Lynch, Citigroup, Moody’s and Natixis. Sanjay is the author of “Risk Transparency” (Risk Books, 2013), Data Privacy and GDPR Handbook (Wiley, 2019) and co-author of “The Fundamental Review of Trading Book (or FRTB) – Impact and Implementation” (RiskBooks, 2018).

Sanjay was the Founding Director of the RBC/Hass Fellowship Program at the University of California at Berkeley and is an Adjunct Professor at EDHEC, Nice in France. Sanjay is also Adjunct Professor at Fordham University where he teaches a similar master’s capstone course and at Columbia University. He served on the Global Board of Directors for Professional Risk International Association (PRMIA).

He holds a PhD in Finance and International Business from New York University and an MBA from the Wharton School of Business and has undergraduate degrees in Physics and Marine Engineering. Sanjay acquired his appreciation for risk firsthand as a merchant marine officer at sea where he served for seven years and received the Chief Engineer’s certificate of competency for ocean-going merchant ships.

Tim Glauner

Tim leads the Americas’ Capital Markets practice as a Principal Global Solution Consultant at Finastra (formerly Misys) specializing in front-office, risk and quantitative areas in capital markets for broad asset class coverage including interest rate/inflation/FX/hybrid derivatives, fixed income including corporate and ABS/MBS securities.

Over the last 25 years Tim has worked as a developer for Summit, quant developer for a Tier-1 investment bank and a large hedge fund. For Finastra, he led the technical consulting team and oversaw over 20 implementation projects. His current engagements comprise functional areas for front-office and risk in Finastra’s Fusion Capital and Fusion Risk platforms. His client coverage includes over 100 financial institutions including Deutsche Bank, HSBC, The Worldbank, Citibank, State Street, BB&T, Fannie Mae, and Bank of America.

He has implemented one of the earliest explanatory P&L analytics for rates along with implementing one and two-factor interest rate models using lattice and Monte-Carlo models, prepayment models, relative value analytics and firm-wide risk management analytics. He was instrumental in designing and writing the pricing and curve API library for Summit.

Tim holds a B.S. from the Technical University in Karlsruhe, Germany, and two M.S. degrees in Computer Science and Mathematics from the Courant Institute at New York University. He is an adjunct professor at Fordham University’s Gabelli School of Business and has taught courses covering capital markets and FRTB. He is also an Associate at Columbia University in the Enterprise Risk Management program.