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Understanding the significance of SOFR discounting for derivatives trading and risk

Understanding the significance of SOFR discounting for derivatives trading and risk

Two years in, the transition toward secured overnight financing rate (SOFR) has seen several milestones crossed, with 2019 in particular seeing a strong acceleration in SOFR usage. With all the SOFR trading activity that has taken place so far, the picture is solidifying over how the switch from overnight indexed swaps (OIS) to SOFR discounting will impact the market.

Being aware of the full impact of these changes will be key to understanding the implications for your derivatives trading business. Are you prepared? Do you know what to expect?

In this paper, Ping Sun, senior vice-president, financial engineering at Numerix, explains:

  • The differences between OIS curves and SOFR curves
  • The impact of SOFR discounting on future cashflow
  • The dynamics of SOFR discounting risk
  • What is impacted by the replacement of Libor with SOFR as the underlying of the derivatives market

 

Read/download the white paper at Risk Library

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