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Price discovery between forward-looking SOFR and LIBOR

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Listed:
  • Indriawan, Ivan
  • Jiao, Feng
  • Tse, Yiuman

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.

Suggested Citation

  • Indriawan, Ivan & Jiao, Feng & Tse, Yiuman, 2022. "Price discovery between forward-looking SOFR and LIBOR," Finance Research Letters, Elsevier, vol. 47(PB).
    • Handle: RePEc:eee:finlet:v:47:y:2022:i:pb:s154461232200109x
    DOI: 10.1016/j.frl.2022.102797
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    SOFR; LIBOR; Forward-looking term rates; Price discovery;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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