I am studying a previous post on how to build
SOFR discount curve here Libor transition: Building SOFR discount curve
However, I struggle to understand the below formula
What is the reason of having
LHS as 100 i.e. the Principal?
I understand that for normal
IRS where float rate is determined by
LIBOR and also discount factor is LIBOR then the PV of all floating leg CFs is 100 on each CF date. But here we are talking of different kind of
Swap, where floar CF is determined not by
LIBOR but the daily
SOFR fixes during the interest period.
So, are they basically the same? Why?
Secondly, what if I am building
SOFR curve not in the start day of
Swap (or any float CF day)? How should I change above formula? Or, in the construction of
SOFR curve, we will only consider
SWAP instruments that starts on the construction date?