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Schrodinger’s LIBOR Refuses to Leave Its Box

While market participants drag their heels, the deadline to move away from LIBOR approaches unabated.

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By the end of 2021, the smorgasbord of benchmark borrowing costs known as the London interbank offered rate (LIBOR) is due to die. Rendered archaic by shifts in the wholesale money markets, not to mention sullied by rigging, the world’s regulators have deemed LIBOR no longer fit for purpose.

And yet… the effort to replace LIBOR is “the largest financial engineering project the world has ever seen,” Darrell Duffie, a finance professor at Stanford University, said last week. Dubbed in the past “the world’s most important number” by the British Banking Association, the body that used to oversee it, LIBOR is proving almost impossible to kill off.

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