Long Live SOFR

Published on June 26, 2023 by Premium

The move away from a credit sensitive reference rate implies that credit concerns can now only manifest in price, potentially amplifying volatility during times of financial stress. USD LIBOR will officially be replaced on June month-end by SOFR, a reference rate based on overnight Treasury repo transactions. SOFR is very different from LIBOR in that it is both credit risk free and is not forward looking, though forward looking versions have been calculated using derivatives. […]

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