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Joined: April 26th, 2013, 10:48 am

IRS using SOFR curve

November 8th, 2023, 2:31 pm

I have recently rejoined the quant world after taking a 10-year hiatus in the Fintech world, and as such my question may be very trivial, apologies in advance.

I understand that the LIBOR (and related) rates have been ditched in favour for SOFR. This is a 1-day rate whereas LIBOR was a 3M rate. 

  1. How will the 1D SOFR rate be used in pricing and valuing an IRS, specifically, how is the forward rate (fixing rate) computed.
  2. Is there a liquid SOFR yield curve which is used to value the swap?
  3. Are there any nuances to normal pricing / par valuing of a vanilla swap?
  4. The firm I joined use an approach with spreads over LIBOR in their bootstrapping and xVA tool. Is this common practice?
  5. I have found a grand total of 1 paper on SOFR bootstrapping and another one paper on Short Rate Hull White simulation. Why is the research so thin on this subject?
Thanks in advance!