The transition from LIBOR-based loan and derivative products to LIBOR alternatives such as the Secured Overnight Funding Rate (SOFR) is likely going to happen. During the transition, end users and borrowers face the possibility of having mismatches in the rates underling their debt and derivatives. Whether or not liquidity will emerge in derivative products that are necessary to enable market participants’ transitions in a way that minimizes the potential for value transfer or increased costs is uncertain at this point. Chatham is working with regulators and industry to identify the swap products, valuation tools, and a transition framework that will best minimize the disruption that end users and borrowers could face.
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