Timeline for Difference between 1-month and 3-month SOFR, and the relationship between them
Current License: CC BY-SA 4.0
8 events
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| Jan 27, 2023 at 20:49 | comment | added | L. Francis Cong | @GustavoLouisG.Montańo I am not sure if I understand your question, but I put my thought on their method in the main answer. Also I don't think their detailed methodology is publically available given that it is proprietary. | |
| Jan 27, 2023 at 20:48 | history | edited | L. Francis Cong | CC BY-SA 4.0 |
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| Jan 27, 2023 at 14:50 | comment | added | Gustavo Louis G. Montańo | Fantatsic. One last question: While $\tau$ is fixed in our example, in reality, there are a set of dates that $\tau$ needs to be applied to. How is this done? In other words, perhaps, say I have SOFR term structure. How would I derive the 3M curve from this? I'll be sure to read the documentation available, though, curious to hear your thoughts. | |
| Jan 27, 2023 at 14:48 | vote | accept | Gustavo Louis G. Montańo | ||
| Jan 27, 2023 at 14:31 | comment | added | L. Francis Cong | @GustavoLouisG.Montańo Yeah. You are right. I've modified my answer. | |
| Jan 27, 2023 at 14:30 | history | edited | L. Francis Cong | CC BY-SA 4.0 |
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| Jan 27, 2023 at 13:44 | comment | added | Gustavo Louis G. Montańo | Hi @L. Francis Cong. – thank you very much for your reply. Your knowledge is excellent, and I appreciate your time. Is it possible that you are missing a $-1$ at the end, thereby giving $R_{t,t+\tau}$ a rate intepretation? That is $$ R_{t,t+\tau}=\mathbb{E}^Q\left[\prod_{s=t}^{s=t+\tau-1}\left(1+\frac{d_sr_s}{360}\right)\right]-1 $$ With this definition I believe I understand what $X$-M SOFR represents. $X=\tau$ in your explanation, and it is simply the forward interest rate, starting at $t$ and maturing at $\tau$ periods later. Ah - yes - we add a risk-premium to the SOFR. | |
| Jan 27, 2023 at 12:28 | history | answered | L. Francis Cong | CC BY-SA 4.0 |