As in the US there is a push to replace IBOR based swaps with SOFR rate does that mean that SOFR swap pricing will return to using a single curve framework as LIBOR swaps did pre the financial crisis?

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    $\begingroup$ Nah you will still have multicurves, SOFR will become the main benchmark for USD and LIBOR will get phased out (though some people think LIBOR won’t completely go away but let’s see!) $\endgroup$ Oct 21, 2020 at 17:11
  • $\begingroup$ Even for swaps where SOFR is the reference rate? $\endgroup$ Oct 21, 2020 at 17:14
  • $\begingroup$ It depends on whether the rates derivatives markets will be in SOFR / Term-SOFR in the future. If that’s the case then we might see less necessary curves / a single curve world as there will be no credit risk differential in the terms any more. $\endgroup$ Oct 21, 2020 at 17:14
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    $\begingroup$ @MagicIsInTheChain: discounting just switched to SOFR from Fed Funds at the main clearing houses. Following Libor cessation in the US next year, Libor is meant to be replaced by SOFr + fixed spread: wouldn't that sort of be like single curve framework, when just considering a single vanilla IRS? Otherwise you are correct to point out that multi-curve framework will stay apply to many other non-vanilla examples, such as collateralized portfolios, etc. $\endgroup$ Oct 21, 2020 at 18:22
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    $\begingroup$ @Jan Stuller. True that SOFR will become the main interest rate benchmark and the main OIS benchmark, hence liquidity likely to concentrate on SOFR based product , but Fed rate likely to retain some interest in the form of say swaps between Fed rate and SOFR. Basis between different SOFR also likely to be of interest. $\endgroup$ Oct 21, 2020 at 18:50

1 Answer 1


I think the question was about dual curve stripping.

As much as I know, the market is using SOFR discounting for all sorts of quotations now. For example, swaption vol is quoted with SOFR discounting, CME and LCH moved to SOFR PAI and discounting on Oct. 16 2020 on new AND legacy swaps.

For EUR cleared, major CCPs did this since July 27 2020.

The market switched to discounting with the relevant RFR rates on the dates above. Hence, if you have a dual stripped curve (e.g. 3m US libor), you use SOFR and no longer OIS (FF).

ISDA fallbacks will apply from 31 December 2021 for GBP, JPY, CHF and Euro-LIBOR and from 30 June 2023 for USD LIBOR. Even if there were some synthetic or "zombie" Libor after it officially ceases to exist, it is expected that liquidity will drop significantly. Note that the FED have issued supervisory guidance encouraging banks to “cease entering into new contracts that use USD LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021”.

Once Libor is gone, your major reference is RFR. As such, you do not have dual curve stripping. The only remaining "dual curve" logic should be having CME vs LCH stripped curves to account for the basis due to IM imbalances at CCPs in my opinion.


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