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
