The promises and pitfalls of the secured overnight financing rate

Jungkyu Ahn and Yongkil Ahn

Applied Economics Letters, 2025, vol. 32, issue 9, 1283-1287

Abstract: The Secured Overnight Financing Rate (SOFR) significantly diverges from Treasury Bill rate when the financial market is under stress. We document that this divergence is significantly manifested in the basis swaps market and that the SOFR’s abrupt downward deviations are associated with increases in the VIX index. Hence, we doubt whether the SOFR is resilient enough as a reference rate for fixed-income instruments when the financial market is in a state of turmoil.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2024.2302896 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:32:y:2025:i:9:p:1283-1287

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504851.2024.2302896

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().