The financial scandal involving Barclays and the manipulation of the Libor rate highlighted the need for a more reliable benchmark. This led to the introduction of the Secured Overnight Financing Rate (SOFR), a rate based on actual transactions and secured by U.S. Treasury securities, offering a transparent and stable alternative to Libor. SOFR is calculated using a wide range of overnight repurchase agreement transactions, ensuring a comprehensive view of the borrowing costs in the Treasury collateral market. Its volume-weighted median calculation method provides a fair and accurate representation of overnight borrowing costs, making it a robust and reliable benchmark rate. The transition from Libor to SOFR is significant for the financial industry, reflecting a move towards greater stability and integrity. SOFR's adoption across various financial transactions underscores its importance as a benchmark rate, influencing interest rates, investment returns, and the overall economic environment.
  • Articles
  • Understanding SOFR: The New Benchmark in Finance
1 / 3

Understanding SOFR: The New Benchmark in Finance

The financial scandal involving Barclays and the manipulation of the Libor rate highlighted the need for a more reliable benchmark. This led to the introduction of the Secured Overnight Financing Rate (SOFR), a rate based on actual transactions and secured by U.S. Treasury securities, offering a transparent and stable alternative to Libor.

Back
FAQAbout PeraWise
Privacy PolicyTerms of Service