Waterfall methodology: Difference between revisions
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imported>Doug Williamson (Add definitions. Sources: linked pages.) |
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'' | 1. ''Project management.'' | ||
A linear and sequential approach to project management. | |||
Contrasted with ''agile'' methodology. | |||
2. ''Risk-free rates - valuation.'' | |||
Similarly predetermined steps and prioritisation in determining the basis of contributions to the calculation of risk-free interest rates. | |||
Waterfall methodologies are designed to improve consistency and objectivity. | |||
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:''The Treasurer's Wiki - LIBOR.'' | :''The Treasurer's Wiki - LIBOR.'' | ||
3. ''Other contexts.'' | |||
Similar approaches in other contexts. | |||
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* [[Liquidation]] | * [[Liquidation]] | ||
* [[Preferential creditor]] | * [[Preferential creditor]] | ||
* [[Project management]] | |||
* [[Risk-free rates]] | * [[Risk-free rates]] | ||
* [[Senior debt]] | * [[Senior debt]] | ||
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* [[Valuation]] | * [[Valuation]] | ||
* [[Waterfall]] | * [[Waterfall]] | ||
== Other links == | == Other links == | ||
Revision as of 09:57, 27 May 2021
1. Project management.
A linear and sequential approach to project management.
Contrasted with agile methodology.
2. Risk-free rates - valuation.
Similarly predetermined steps and prioritisation in determining the basis of contributions to the calculation of risk-free interest rates.
Waterfall methodologies are designed to improve consistency and objectivity.
- Uniform determination methodology
- 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.
3. Other contexts.
Similar approaches in other contexts.
See also
- Agile
- Equity
- Fallback
- Funding stack
- Junior debt
- LIBOR
- Liquidation
- Preferential creditor
- Project management
- Risk-free rates
- Senior debt
- Seniority
- Subordinated debt
- Valuation
- Waterfall
Other links
LIBOR transition: EURIBOR fallbacks - ECB publishes recommendations, ACT Blog 18 May 2021
