IDEAS home Printed from https://ideas.repec.org/a/eee/jfinec/v168y2025ics0304405x25000261.html
   My bibliography  Save this article

Benchmarking benchmarks

Author

Listed:
  • Brugler, James
  • Khomyn, Marta
  • Putniņs̆, Tālis

Abstract

Financial benchmarks such as LIBOR underpin the pricing of trillions of dollars of contracts around the world. We evaluate the quality of benchmark prices using a state-space model to separate information from noise. Applying the method to LIBOR benchmarks and their replacements, we find that alternative reference rates (ARRs) are less noisy in four of the five currencies. However, the USD ARR is considerably more noisy, resulting in billions of dollars of noise-related wealth transfers between contract counterparties. We show that benchmark reforms such as expanding the reference market and using a trimmed mean can reduce noise in ARRs.

Suggested Citation

  • Brugler, James & Khomyn, Marta & Putniņs̆, Tālis, 2025. "Benchmarking benchmarks," Journal of Financial Economics, Elsevier, vol. 168(C).
  • Handle: RePEc:eee:jfinec:v:168:y:2025:i:c:s0304405x25000261
    DOI: 10.1016/j.jfineco.2025.104018
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304405X25000261
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.jfineco.2025.104018?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jfinec:v:168:y:2025:i:c:s0304405x25000261. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505576 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.