Swaptions transition snags trigger term SOFR calls
Liquidity flips to RFR but laggards struggle with behavioural quirks for contracts referencing overnight rates
The US swaptions market has made a decisive shift towards the secured overnight financing rate, or SOFR, though some firms are still struggling to adapt their swaptions activities to an overnight rate, adding further weight behind a call to soften restrictions on a term version of the risk-free rate (RFR).
“On the buy side, a lot of activities are still in the Libor space,” said Ping Sun, senior vice-president of financial engineering at Numerix. “The big difficulty is people are still getting
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