Compression allows clients to “tear-up” offsetting trades in their portfolios to reduce the notional outstanding and the number of line items in their portfolio while maintaining the same risk exposure. The BoE Working Group on Sterling Risk-Free Reference Rates is to examine the use of compression auctions to aid the transition from LIBOR to RFRs. Work conducted by Stanford University’s Professor Darrell Duffle, which was presented at the working group’s December meeting, suggested that using compression auctions to convert centrally cleared contracts referencing LIBOR to contracts referencing compounded SONIA or another benchmark could reduce the amount of long-dated legacy LIBOR swaps. In a recent report titled “Monetary Policy and Inflation Targeting,” published in January 2017, the IMF noted that, while inflation targeting has been successful for some countries, it may not be appropriate for all countries.
The BoE Working Group on Sterling Risk-Free Reference Rates is to examine the use of compression auctions to aid the transition from LIBOR to RFRs. Work conducted by Stanford University’s Professor Darrell Duffle, which was presented at the working group’s December meeting, suggested that using compression auctions to convert centrally cleared contracts referencing LIBOR to contracts referencing compounded SONIA or another benchmark could reduce the amount of long-dated legacy LIBOR swaps. In a recent report titled “Monetary Policy and Inflation Targeting,” published in January 2017, the IMF noted that, while inflation targeting has been successful for some countries, it may not be appropriate for all countries.