Price discovery between forward-looking SOFR and LIBOR

Ivan Indriawan, Feng Jiao and Yiuman Tse

Finance Research Letters, 2022, vol. 47, issue PB

Abstract: Using the forward-looking Secured Overnight Financing Rate (SOFR), we find that SOFR provides more price discovery than the London Interbank Offered Rate (LIBOR). In the context of incorporating information about monetary policy into market rates, our results support the Alternative Reference Rates Committee policy of selecting SOFR as a replacement for LIBOR.

Keywords: SOFR; LIBOR; Forward-looking term rates; Price discovery (search for similar items in EconPapers)
JEL-codes: E43 E58 G12 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:47:y:2022:i:pb:s154461232200109x

DOI: 10.1016/j.frl.2022.102797

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