Benchmarks & Indices

Benchmarks and reference rates underlie many valuation methodologies and play a critical role in the production of prices for a wide range of financial products, from derivative contracts, to structured products, fixed income instruments and funds (exchange traded or otherwise).

The valuations of many derivative contracts and structured products are based on a specified reference rate, be it an FX fixing, an interbank offered rate or swap or a widely used benchmark index. The prices of illiquid fixed income securities are frequently derived using a present value approach, discounted based on a benchmark yield curve. The Net Asset Values of funds are subsequently created using these prices.

It is clear, therefore, that calling into question the veracity and reliability of these underlying benchmarks also compromises the host of downstream valuations produced using them. It is impossible to quantify this impact, but over the period of time that reference rates and curves were manipulated, many millions of prices used for NAV calculations, client reporting, performance measurement and risk management must also be discredited.

Read More - Blog "fixing-the-fix"

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Index Providers Discussion - IOSCO Principles

Sui Chung

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Gavin Lee

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Chris Woods

Managing Director, Governance, Risk & Compliance


1 week, 5 days ago: New fund valuation related enforcement from the SEC. This time it costs a hedge fund $5m!