Waterfall: Difference between revisions

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imported>Doug Williamson
(Add priority ordering in liquidation.)
imported>Doug Williamson
(Update for LIBOR transition.)
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Abbreviation for ''waterfall methodology''.
Abbreviation for ''waterfall methodology''.
:<span style="color:#4B0082">'''''Uniform determination methodology'''''</span>
:From mid-2018 a new, uniform determination methodology, the “waterfall methodology”, by which each contributing bank calculates the rates it submits, was progressively introduced. The underlying interest - the market or economic reality that the benchmark seeks to measure - remains the same.
:The “waterfall” methodology refers to the three bases for a bank’s rate submission... the first practical method being used in any case according to the information available... 
:The three bases in the LIBOR waterfall are:
:Level 1: Transaction-based
:Level 2: Transaction-derived
:Level 3: Expert judgement
:In summary, the new methodology is more rooted in actual transactions as far as possible. Using less “judgement” that can involve a (possibly unconscious) element of “smoothing”, contributed rates are expected to vary up and down more by small amounts each day. And, recognising the reality that banks short-term-fund in the wider money-markets now, rather just inter-bank, the range of transactions considered is being widened and this can mean small rate differences.
:Following the successful completion of the transition period, LIBOR is now, for each currency/maturity combination, the rate output as the arithmetic mean of the relevant panel banks’ waterfall-methodology based submissions, excluding the highest and lowest quartile of submissions.
:''The Treasurer's Wiki - LIBOR.''




Revision as of 21:11, 25 April 2022

1. Liquidation - claims.

The priority order of claims in a liquidation.

Broadly speaking, this priority order is:

  1. Secured creditors
  2. Preferential creditors
  3. Fixed charge creditors
  4. Floating charge creditors
  5. Unsecured creditors
  6. Connected unsecured creditors
  7. Shareholders


Breaching this ordering is a preference, that can be effectively reversed by an order of the court.


2. Liquidation.

The allocation of - usually limited - available funds in this priority order in a liquidation.


3. Allocating limited funds.

Any other ranked allocation of funds.


4. Risk-free rates - valuation.

Abbreviation for waterfall methodology.


See also

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