Is Your SOFR Readiness Being Put to the Test? Let’s Talk About Post-Transition Issues and Challenges

The June 30, 2023 deadline for publishing the five remaining US dollar Libor rates marked a critical milestone in the Libor transition process. This date signified the final stages of the Libor phase out and triggered a future with alternative risk-free rates, such as SOFR for dollar-denominated derivatives and loans.

As expected, working with SOFR is producing several challenges for institutions. In this Q&A, five Numerix experts discuss the various issues tied to SOFR that are impacting the market. These include:

• Benchmark challenges
• Operational challenges
• System validation completeness
• Market data quality and availability
• Curve building challenges
• SOFR liquidity issues
• Calculation complexities
• Trading structured notes based on daily compounded SOFR
• Impact of SOFR on bonds and loans