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Darrell Duffie, The Adams Distinguished Professor of Management and Professor of Finance, Stanford University

Alpha Exchange

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Transition From LIBOR to Risk-Free Overnight Rate

The chapter explores the reasons behind switching from LIBOR to the risk-free overnight rate, highlighting the discovery of banks cheating on their LIBOR reports. It discusses the process of deciding on replacement reference rates and the implications of robust and transparent rates. The chapter also proposes using a credit-sensitive rate for applications like revolving lines of credit.

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