Question: 5. What is the difference between an indicative rate (like LIBOR) and a transaction rate (like the Secured Overnight Financing Rate [SOFR])? As we discussed

5. What is the difference between an indicative rate (like LIBOR) and a transaction rate (like the Secured Overnight Financing Rate [SOFR])? As we discussed in class, LIBOR will no longer be an acceptable reference rate. Currently, LIBOR is used in both the Eurodollar futures contract and interest rate swaps. What is the advantage of the current use of LIBOR in both the futures contract and interest rate swaps? What issues should guide regulators as they choose an alternative rate?

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