The 3 fields and concepts you'll meet in the response — defined in plain English, each with a real example value.
Secured Overnight Financing Rate - the benchmark rate for USD-denominated derivatives and loans.
SOFR is based on overnight Treasury repurchase agreement (repo) transactions. It is published daily by the Federal Reserve Bank of New York and reflects the cost of borrowing cash overnight collateralized by Treasury securities.
Examplevalue: 5.31 (5.31% annual rate)
Sterling Overnight Index Average - the benchmark rate for GBP-denominated products.
SONIA reflects the average of interest rates paid on overnight unsecured wholesale deposits in sterling. It is administered by the Bank of England and is the primary GBP risk-free rate.
Examplevalue: 5.19 (5.19% annual rate)
A theoretical interest rate with zero default risk, used as a benchmark for pricing other rates.
While no rate is truly risk-free, overnight rates secured by government securities or backed by central banks are considered near risk-free. These rates serve as the foundation for pricing loans, derivatives, and other financial products.
ExampleSOFR, SONIA, ESTR are considered risk-free rates
