LIBOR transition series – Perspectives on credit spread adjustments

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This article focuses on the three ISDA-provided alternatives for developing a credit spread adjustment to account for the bank credit risk premium in various IBORs, which is absent in the alternative RFRs as they are generally risk-free or nearly risk-free. As discussed further below, while the credit spread adjustment options provide a rational and systematic way to operationally convert from the relevant IBORs to the RFRs, all three options have limitations which should be considered by market participants.

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