Questions tagged [sofr]
The Secured Overnight Financing Rate and the transition from Libor to SOFR.
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Approximating implied price vol from implied yield vol?
I am wondering if there are any approximations that exist to convert yield vol to price vol? I am dealing options on SOFR futures, which can be quoted in yield and price (i.e. 3% put and $97 call are ...
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SOFR futures options margining
If we consider quarterly (or serial, or mid-curve) SOFR options, traded on CME. Are those options subject to margining? It is clear to me that their underlying (say, 3M SOFR futures) is margined as ...
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How to best calibrate a short rate curve using (compounded) SOFR futures & swaps
If one imposes a form $r(t) = \text{...}$ on the cc. short rate, and aims to fit the short end of a SOFR (or another modern RFR) using futures, how would one best go about this within a "curve-...
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Why the biz day convention of OIS Rate helper is hard coded as Modified Following in QL?
I am using QuantLib OIS Rate Helpers, and traced schedule creation back to the following function, and noticed that the business convention is hard coded as MF. Is the biz day convention hard coded ...
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Bootstrapping overnight SOFR rates from futures
I'm struggling with the best way to approach bootstrapping out a SOFR curve using SOFR 1m and 3m futures. Theoretically, unless I'm wrong, there should be a way to price out the expected overnight ...
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Building SOFR curve - explanation of the formula used
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 ...
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Swap IRS - SOFR lookback
I have a fixed-float swap valuation to realize. The floating leg is referenced to SOFR with a 10 days lookback. The first coupon has already started, on 01/09/2023, and ends on 01/12/2023. The first ...
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SOFR futures options
I am trying to take convexity adjustments into account in the bootstrap on the SOFR curve.
I am using cash for the upfront, SOFR swaps from 2Y to the end.
In the mid term I use 2 1M SOFR futures and 7 ...
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How do forward-looking forward rates in the Mercurio's and Lyashenko's normal or extended FMM model represent EURIBOR rates
(By XIBOR I intend any EURIBOR or LIBOR rate. By RFR I intend SOFR for the USD and ESTR (€STR) for EUR.)
I am mainly focused on the EUR rates market (but also a bit on the USD market) and looking for ...
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Quantlib SOFR swap repricing across 2 different dates
I am trying to price SOFR swaps in two different dates (the same swaps, just different curves and dates)
This are my initial parameters:
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How to hedge 3 Month SOFR futures with 1 Month SOFR futures considering FOMC meeting
Has anyone considered trading SR3 vs SR1 SOFR futures? They both have the same underlying basis of daily SOFR, and how would one calculate a hedge ratio for the SR1 to trade along SR3?
Looking at the ...
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Understanding SOFR Fixing Rate Retrieval for Future Dates in QuantLib
I am using QuantLib to calculate the SOFR index for a bond's (ISIN : US025816CL12) cash flows. My objective is to understand how QuantLib computes the SOFR fixing rate for future dates. Here is my ...
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Convexity Adjustments Futures - Sensitivity
If the market prices of SOFR futures are obtained from CME, do we still need to compute convexity adjustments when computing the sensitivity of the IR future?
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Comparison shorted dated tbills and determine which asset class is best return
i was wondering how to create a comparison table across various time horizons for given currencies and see the return/spread over SOFR.
Any Bloomberg links/functions i could use?
Ideally i would like ...
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What could the cashflows of US0SFR1Z Curncy be?
So this "SOFR vs fixed" swap has a fixed leg paying 5.231% yearly and a floating leg paying yearly the yearly compounded SOFR rate, and has a 1W term. If it has started today, it won't have ...
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Using CME SOFR Futures in practice
I'm looking for numerical examples on how CME SOFR futures contracts are used in practice for hedging purposes. Book references containing this discussion are appreciated.
Bloomberg's FLDS function ...
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RFR boostrapping using RFR OIS: Is convexity adjustment technically necessary?
For single-curve RFR bootstrapping, such as a SOFR-based discounting curve bootstrapped strictly using SOFR fixed-float OIS, I am trying to understand if convexity adjustments are technically ...
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What are the quantitative models for modelling the SOFR rate, the IR products when Libor rates end [duplicate]
Many year ago, I worked on the pricing of IR products (Floating rate swap, CMS swap, Cap, Floor,...)
Libor rates are now replaced by SOFR rate. I would like to know
What are the new IR products (...
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Convexity adjustment doubt
So this the question and the answer to the first one states that only the 5 year swap rate will be adjusted for convexity and the answer to the second one states that neither of the rates will be ...
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How are SOFR implied vols calculated? Are they normal or log normal?
How are SOFR implied vols calculated? Are they normal or log normal?
When we are pricing options with black-76 model, implied volatility must be log-normal as black model assumes log normal ...
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Difference between 1-month and 3-month SOFR, and the relationship between them
I want to better understand the difference between the 1-month and 3-month SOFR rate, and when to use each for cash flow discounting.
For example - I have a 5 year project, and someone has decided to ...
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Does the CME Option on 1M SOFR keep trading in the compounding period
I am working with implied vol surfaces for money market options and trying to understand the dynamics of the CME's options on one-month SOFR futures. I want to establish whether trading ceases before ...
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SOFR Transition for Future Flow Transactions [duplicate]
I’m looking for some papers/articles for the transition from LIBOR to SOFR for future flow transactions/securitizations (such as Diversified Payment Rights).
Would be happy if you could share some as ...
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Calculate Dv01 of SOFR futures position
may I know how to arrive at $3.8m/DV01 SOFR futures based on the net long 3M SOFR as at 13 Dec. The net long is 23,333.
Original Text: Hedge funds were net buyers in around \$3.8m/DV01 SOFR futures ...
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Does Quantlib FloatingRateBond support SOFR index?
I am trying to use Quantlib to price FloatingRateBond, Thanks to some other posts on the stack I managed to do it for Ibor indexes. I tried to use the SOFR, but I didn't succeed, I couldn't get around ...
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SABR LMM for RFR
Is there a research showing a way to use SABR LMM with new RFRs such as SOFR, i.e. pricing exotic path-dependent RFR derivatives with volatility smile and skew?
I'm aware that
Looking Forward to ...
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Replacement for LIBOR Market Model (LMM)?
With the transition from LIBOR to SOFR, will the LIBOR Market Model be replaced by a new model? Perhaps this has already happened. If yes, what is this new model? If not, will the LIBOR Market ...
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Interpreting SOFR OIS Curve from CME
I have a doubt regarding the daily SOFR OIS Curve published by CME.
https://www.cmegroup.com/trading/interest-rates/cleared-otc-sofr-swaps.html#sofroiscurve
If we refer to the curve dated 22 Jul 2022.....
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What is the market standard for IR option pricing when moving to SOFR
From books it looks like market standards to price IR options, like swaptions, are SABR, LMM or mix of the two (SABR-LMM).
But LMM models the forward LIBOR rate. What will happen to it once LIBOR ...
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Libor to SOFR transition Yield Curve Construction
With the imminent transition from LIBOR to SOFR next year, what are the data points practitioners are using to construct a yield curve? Also, since LIBOR implicitly took into account credit risk of ...
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Payment Delay Convexity Adjustment Formula for RFR Rates
For Libor we have the following Convexity adjustment formula for payment delay (under normal model)
$$CA = P(0,T_e,T_p)\rho\sigma_e^L\sigma_p^L\Delta_e^p(T_s-t_0)$$
where
$T_s$ is the period start ...
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Repricing SOFR Quotes and Non-Zero NPV
I generated/calibrated a SOFR Curve using Quantlib Python and would like to know why when repricing the swaps have non-zero NPVs. Appreciate any assistance. Thank you.
Parameters
...
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Term SOFR rate formula
The following website gives the specifications of the CME Term SOFR reference rates: CME Term SOFR.
Point 1 in the link above specifies that the tenors that are currently supported are 1m, 3m, 6m, and ...
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Pricing caps/floors on backward-looking USD SOFR with forward-looking LIBOR model
The payoff of a cap/floor is calculated as a payoff of constitutient caplets/floorlets.
The SABR volatility model has the implied volatility approximations of Hagan et al.
$$\sigma^f_{IV}\approx \...
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OIS floating-floating cross-currency basis swap
I'm trying to understand whether notional resets on a floating-floating cross-currency basis swap play a role or not when the coupon payments are SOFR-based (with no spread) and they are discounted ...
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What rates does CME use for the SOFR futures settlement prices
I am reading CME Methodology for SOFR Future settlement calculation. The calculation seems to be straight forward but I am confused about the data CME uses for settlement price.
I am assuming it is ...
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SOFR - Notice of Payment
I am reading SOFR USER Guide - https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2019/Users_Guide_to_SOFR.pdf
I am having trouble understanding SOFR payment in arrears, especially lockout ...
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The fate of Eurodollar futures post LIBOR cessation
It's my understanding that 3-month USD LIBOR will continue to set until June 30, 2023. What will happen to CME (3-month) Eurodollar futures after LIBOR is no longer published? Will they use fallback ...
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Market convention for building the front-end of the SOFR discounting curve
In SOFR Discount Curve Construction in Nov 2021, @dm63 does an excellent job describing the way to build the SOFR discount curve. A few questions:
What is the market convention for building the ...
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USD swaps trading post LIBOR: the current state of the world (January 2022)
The USD interest rate swaps market has been transitioning from LIBOR to SOFR for some time. In the "old days" when swaps reset against LIBOR underlyings, there were a few "market ...
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Estimation of RFR payoffs of flavor Look-back with NO observation period shifts
With the new RFR swaps (Say $IRS Fixed to compounded SOFR), there are several adjustments that can be done to allow some room for the coupon on the floating leg to be known a couple of days ahead of ...
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SOFR Transition
I have few doubts regarding transition from IBOR to SOFR rates.
How will the method of calculating/estimating curve rates change after changing to SOFR?
Will there be any change in valuation ...
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DV01 on LIBOR vs. SOFR basis Swaps
If I had entered into a USD 10mn pay SOFR, receive 3M LIBOR swap with a 5yr maturity, I would have had a positive NPV of about 80k by the beginning of March due to the massive drop in SOFR (1.55 to 0....
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Is an 18 month OIS a bullet?
I have been looking at SOFR/fixed swaps. On Bloomberg I found USOSFR1F which is the 18 month tenor on the SOFR OIS curve.
My understanding is that SOFR OIS pays annually. When bootstrapping to get a ...
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SOFR Discount Curve Construction in Nov 2021
On July 29, 2021, the Alternative Reference Rates Committee (ARRC) formally recommended the forward-looking term rates based on SOFR published by the CME Group.
CME currently publishes Term SOFR for ...
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which market instruments are used to strip the SOFR curve under 1 year?
which instruments are used to strip the SOFR curve for the short term of the curve(below 1 y) ?
there are no swaps with maturity under 1 year, right?
thanks
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LIBOR replacement in client products and prospective pricing
I am asking whether the industry, or single banks, have made up their minds already on how to replace the 'missing' interbank risk compensation component in their variable rate credit products when ...
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How to account for the credit spread ( e.g. LIBOR + 2%) when using the Multicurve Methodology in valuing a Swap
When valuing an Interest rate swap, counterparties will typically issue the contract at a Libor + credit premium, e.g. Libor +2%. When valuing a swap, we require a LIBOR forward curve and Discounting ...
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Convexity Adjustment of Daily Compounded Swap under Hull-White Model
I am working on a problem that deals OIS daily compounded swap under Hull-White 1-factor model. I am struggling with pricing the floating leg, on a delayed payment date:
$E^{T^p}_t[\prod_{i=0}^{n-1} (...
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Which SOFR rate to use and when?
When looking at the actual daily values provided by the SOFR API it's a bit confusing when/where to use which values given they provide two sets of values with different dates, SOFR on a T-1 basis and ...
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