Loans and Cash Instruments

Learning Objectives

  1. Overview of LIBOR and How We Got Here.
  2. RFR Indices Across All Currencies Worldwide and Its Conventions.
  3. LIBOR Transition Impact on Financial and Non-Financial Risk Management.
  4. LIBOR Usage and Major Components of Required Model Changes.
  5. Building the Short and Long Ends of RFR Curves and Indices.
  6. Incorporating Replacement RFRs/Fallback Characteristics and Behavior.
  7. Specific Impacts on Cash Instruments and Lingering Questions Across Jurisdictions.
  8. Impact of small SOFR convention discrepancies to discount factors.
  9. P&L Impact on Fallback Date and Its Implications.
  10. Syndicated, Bi-lateral Loans and Hedged Loan Approach.
  11. Dynamic Mortgage Models with Current Coupon, Prepayment and Credit.
  12. Regulatory and Legislative Initiatives.
  13. ARRC Practical Implementation Checklist for SOFR Adoption.
  14. Consent Solicitation, Fallback Language and Waterfall Across Jurisdictions.
  15. Fannie Mae and Freddie Mac LIBOR Transition Playbook for US Residential Mortgages and Structured Securities.

Program Structure and Key Aspects

  • Flexible and self-paced online learning program.
  • 20 sessions of 30-45 minute duration with adaptive concept checks.
  • Weekly online live Q&A sessions with faculty.
  • Real quantitative and operational case studies.
  • Completion certificate at the end of the program.
  • Continuous course updates with market and regulatory developments.

Who Should Attend

  • Loan and Credit Officers
  • Financial Controller and Analyst
  • Business and Technical Consultants
  • Legal and Compliance Officers
  • Business Analysts and Quality Assurance
  • Management Consultants

Course Structure

1. Overview of LIBOR and How We Got Here

  • Genesis of LIBOR, its composition and mechanics
  • IBOR as a global benchmark and foundational challenges
  • 2008 Global Financial Crisis and necessity of LIBOR replacement
  • Overview of the LIBOR BOOTCAMP program

2. RFR Indices Across All Currencies Worldwide and Its Conventions

  • Mapping from original LIBOR indices to the new RFR indices and how accrual and cashflow calculations are defined for RFR indices
  • Conversions for USD, EUR and GBP and what we can expect from the current OIS rates
  • Detailed description of new vanilla trade conventions for all currencies and indices
  • Detailed description of fallback trade conventions for all currencies and indices

3. Cash Instruments

  • Scope and size of cash instruments and markets
  • Challenges specific to cash markets
  • Definitional Overview
  • Consent Solicitation
  • ARRC Recommended Fallback Language for all types of instruments
    • Floating Rate Notes
    • Bilateral Business Loans
    • Syndicated Loans
    • Securitization
    • Adjustable-rate Mortgages (ARMs)

4. P&L Impact on Fallback Date and Its Implications

  • Significance of value transfer for existing Libor contracts
  • Impact on counterparty exposure, collateral and xVA measures
  • Impact of tax treatment on the decision- making process for transition timing
  • Limits and risk mitigation on potential fallback P&L impact
  • Exposure measures and hedging of LIBOR SOFR basis spread

5. Curve Construction of new RFR Indices

  • Recommended Curve Instruments across USD, GBP and EUR for RFR
  • Comprehensive List of New RFR Instruments for Curves
  • Which Rates to use for FX Forward Interest Rate Parity
  • Cross Currency Basis and timing in US and other Jurisdictions
  • New Mechanisms in Curve Construction for SOFR
  • How to reconcile to CME and LCH curves after PAI change

6. Regulatory and Legislative Initiatives

  • Details of the involvement of specific regulatory bodies
  • List and summaries of proposals in 2020 and upcoming 2021
  • RFR Working Group Touch Legacy Task Force overview
  • OCIE Risk Alert examination on LIBOR transition
  • Impact on consumer finance related legislation and regulation

7. Overview of Cash Instruments and LIBOR transition

  • Scope and size of cash instruments and markets​
  • Challenges specific to cash markets​
  • Definitional Overview​
  • Consent Solicitation

8. Consent Solicitation

  • Diversity of Consent Solicitation based on Asset Class
  • Consent Solicitation for English Law Legacy Bond Contracts
  • Operationalizing consent solicitation
  • New York State legislative measures

9. Fallback Language and Waterfall

  • ARRC Recommended Fallback Language for Securitization
  • ARRC Recommendations on Fallbacks for Adjustable-rate Mortgages (ARMs)
  • ARRC Recommended Fallback Trigger Language for new issue FRNs
  • European Central Bank (ECB) Guidance on Fallbacks for Euro Rates

10. Syndicated, Bi-lateral Loans and Hedged Loan Approach

  • RFR market conventions for cash instruments – advance vs. arrear conventions
  • Global alternatives for cash instruments
  • ARRC waterfall recommendations for cash instruments
  • Alternative US RFRs for loans

11. Fannie Mae and Freddie Mac LIBOR Transition Playbook

  • Single family ARMS and securities
  • Single family credit risk transfer
  • Collateralized mortgage obligations
  • Multifamily ARMS.MBS, FRNs and credit risk transfer

12. LIBOR Transition Impact on Financial and Non-Financial Principal Risks

  • Identification of risks introduced with LIBOR replacement RFRs
  • RFR replacement data sources and management
  • Impact on models and recallbration
  • Process and documentation risks

13. Incorporating Replacement RFRs/Fallback Characteristics and Behavior

  • Components of RFR curve documentation
  • Case Study of RFR documentation – zero curves
  • Interpolation techniques and choice
  • Market data and curve reallingment

14. LIBOR Usage and Major Components of Required Model Changes

  • Compounding, Averaging and Daily Observation Impact
  • Curve and Collateral Dependency Revision across all Currencies
  • Move from HJM/LMM to FMM Model
  • Convex Accrual Function across all Asset Classes
  • Funding and Loan Index Recommendations to Account for Credit Component of LIBOR
  • Timeseries Considerations and Historical SOFR model to have data back to 1998

15. Dynamic Mortgage Models with Current Coupon, Prepayment and Credit

  • Stochastic Interest Rate Models and CMS Rates as Inputs
  • Current Coupon Model and lack of SOFR History
  • Prepayment, Default, Loss Severity Models
  • Structured Securities and Collateral LIBOR assumptions

16. Build the Short End of the RFR Curve and 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 Fund rate changes
  • Multiple different overlapping futures contracts in a single curve
  • SOFR term rate and futures

17. Build the Long End of the RFR Curve and Cross-Currency Basis

  • Many alternatives to build the long end of the curve
  • Removal of LIBOR dependency on the SOFR curve
  • Long end discussion with SOFR outright vs basis to OIS or LIBOR
  • Necessity for multi-curve bootstrapping when SOFR swap discounts on SOFR

18. Impact of small SOFR convention discrepancies to discount factors

  • Curve dependency examples and how it affects errors in zero rates
  • Pricing examples for swaps and it’s curves and reconciliation impact
  • Payment and accrual convention impact on zero rates
  • Pricing examples for swaps and it’s curves and reconciliation impact

19. ARRC Practical Implementation Checklist for SOFR Adoption - I

  • Transition program mobilization and management
  • Operational and Technology Readiness​
  • Communication Strategy​
  • Exposure management and valuation

20. ARRC Practical Implementation Checklist for SOFR Adoption - II

  • Portfolio and Product Strategy​
  • Contractual Remediation​
  • Risk Management​
  • Accounting and reporting
  • Taxation and regulation

Certification

After passing all concept checks with 80% correct answers in selected modules, participants will receive certificate of completion. They can select one certificate for all modules and selected masterclasses or individual certificates for each.

Program Expert Faculty

Sanjay Sharma - LIBOR Bootcamp

Sanjay Sharma, PhD

Chairman GreenPoint Financial
Former CRO, RBC Global Arbitrage and Trading and Natixis, North America

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. more…
Tim Glauner - LIBOR Bootcamp

Tim Glauner

Head of Capital Markets Global Solution Consulting For Americas, Finastra

Tim leads the Americas’ Capital Markets practice, Global Solution Consulting at Finastra, 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. more…