RFR
Risk-Free Rate
Definition
The alternative benchmark rates adopted to replace LIBOR and other IBORs, based on actual overnight transactions rather than bank estimates. Key RFRs include SOFR (US), SONIA (UK), €STR (EU), TONA (Japan), and SARON (Switzerland). These rates are considered more robust and less susceptible to manipulation.
Regulatory Context
The transition from LIBOR to RFRs has been one of the largest market infrastructure projects in financial history, affecting trillions of dollars in contracts. Regulators established working groups in each jurisdiction to guide the transition and address legacy contract issues.