Question: 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

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, in the near future LIBOR will not 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? Please Explain all in detail.

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