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Though theoretically the transitioning in contracts from the use of LIBOR to SOFR sounds simple.<\/p>\n
With SOFR there is sizeable trading in the Treasury repo market, if compared to LIBOR as of 2018 it is almost 1,500 times, theoretically making it a more accurate indicator of borrowing costs than the LIBOR.<\/p>\n
LIBOR was based on estimated borrowing rates but the SOFR is based on data from observable transactions.<\/p>\n
Since the two interest rates would have several important differences repricing the contracts would be complicated. <\/p>
LIBOR represents an unsecured loan whereas the SOFR represents loans backed by Treasury bonds, which is a virtually risk-free rate.<\/p>\n
LIBOR has 35 different rates, but SOFR currently publishes only one rate based exclusively on overnight loans.<\/p>\t\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t