Waterfall methodology: Difference between revisions

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''Risk-free rates - valuation.''
1. ''Project management.''


A linear and sequential approach to project management.


Contrasted with ''agile'' 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.  
2. ''Risk-free rates - valuation.''


: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...
Similarly predetermined steps and prioritisation in determining the basis of contributions to the calculation of risk-free interest rates.


:The three bases in the LIBOR waterfall are:
Waterfall methodologies are designed to improve consistency and objectivity.


:Level 1: Transaction-based


:Level 2: Transaction-derived
3. ''Other contexts.''


:Level 3: Expert judgement
Similar approaches in other contexts.
 
 
: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.''




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* [[Agile]]
* [[Agile]]
* [[Equity]]
* [[Equity]]
* [[Fallback]]
* [[Funding stack]]
* [[Funding stack]]
* [[Junior debt]]
* [[Junior debt]]
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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 link ==
[https://www.treasurers.org/hub/blog/LIBORtransition/Guidance/onEURIBOR/fallbacks LIBOR transition: EURIBOR fallbacks - ECB publishes recommendations, ACT Blog 18 May 2021]
[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Cash_management]]
[[Category:Liquidity_management]]

Latest revision as of 21:12, 25 April 2022

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.


3. Other contexts.

Similar approaches in other contexts.


See also


Other link

LIBOR transition: EURIBOR fallbacks - ECB publishes recommendations, ACT Blog 18 May 2021

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