Abstract

ALFEUS, Mesias. Navigating the JIBAR transition: Progress, impacts, readiness, and analytical insights. S. Afr. j. sci. [online]. 2024, vol.120, n.3-4, pp.1-6. ISSN 1996-7489.  http://dx.doi.org/10.17159/sajs.2024/17841.

SIGNIFICANCE: The move away from LIBOR to new risk-free rates is crucial in finance. In this Commentary, I examine South Africa's readiness for transitioning from JIBAR to these new rates, especially regarding interest rate derivatives. I delve into how this shift impacts pricing, unique to South Africa's market. Using a mathematical model based on a 2 x 2 Wishart process, I analyse caplet pricing considering backward- and forward-looking rates. Comparing these caplet types reveals the complexities of pricing in this changing financial landscape. The insights shed light on challenges and opportunities for South Africa and the finance sector as JIBAR nears its end, emphasising the need for robust mathematical strategies in navigating this transition.

Keywords : JIBAR transition; interest rate markets; derivative pricing; Monte Carlo method; Wishart process.

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