Analyzing the Market Impact of SOFR Discounting

Two years in, the transition toward 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 thus far, the picture is solidifying over how the switch from 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 own derivatives trading business. Are you prepared? Do you know what to expect?

In this paper, Ping Sun, Senior Vice President, Financial Engineering, explains the following:

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