Transitioning from LIBOR to SOFR will be relatively seamless since SOFR is calculated similarly to LIBOR.

Question

Quizplus · Accepted Answer

While both LIBOR and SOFR are interest rates, they are calculated differently. LIBOR is an estimate of the rate at which banks can borrow from each other and is set by a panel of banks, while SOFR is based on actual secured overnight funding transactions in the U.S. Treasury repo market. This difference in calculation methods means that transitioning from LIBOR to SOFR will require significant changes in systems and processes for financial institutions.

Transitioning from LIBOR to SOFR Will Be Relatively Seamless Since