Even though substantial progress has been made toward weaningthe global financial system off of LIBOR, markets have undervaluedthe risk that a zombie version of the vital benchmark will continueon, according to JPMorgan Chase & Co. strategists.

Its overseer, the U.K. Financial Conduct Authority (FCA), saidtwo years ago that banks won't have to submit the data used tocalculate LIBOR starting in 2021. However, because there's noexplicit ban on submissions, JPMorgan suspects a smaller panel offirms may keep feeding it numbers, leaving the index in aproblematically undead state.

"Though average zombie LIBOR levels may not differ much from abroader panel, there is a substantial risk of much highervolatility," strategists led by Joshua Younger wrote in a Sept. 6note subtitled "Too weird to live, too rare to die."

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.