The man who stuck the first knife into the London interbank offered rate still thinks it is better than any alternative.
It was easily manipulated. It may even be inherently fictional. But proposed alternatives to Libor, the benchmark that serves as a reference rate for some hundreds of trillions of dollars in financial instruments (estimates range from $200 trillion to $450 trillion), aren’t likely to succeed.
So says Scott Peng, the former Citigroup analyst who, just five months before the collapse of Lehman Brothers in 2008, wrote a research report entitled ‘Is Libor broken?’ that showed Libor was not accurately representing overnight unsecured bank funding costs.
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