Risk-Free Rates (RFRs)

On June 30, 2023, the cessation of the USD LIBOR will mark the next milestone in the global standard implementation for floating interest rates - the "Risk-Free Rates".

As a reminder, LIBOR is an average rate provided by contributions from a panel of banks and does not reflect the actual transactions taking place in the market.

While the LIBOR definition may vary from one currency and marketplace to another, there are common characteristics:

  • It always represent an annual rate for an overnight loan or deposit
  • It is always based on actual transactions observed in the market
  • It must be combined when used over a period longer than overnight (most of the time, the combination will be compounded).

Risk-free Rates available in Fairways Debt

The main indexes are listed for each currency in the table below:

Currency LIBOR RFR
CAD CDOR (Still published) CORRA 
CHF LIBORCHF (Not published anymore) SARON
EUR EURIBOR (Still published) ESTER
GBP LIBORGBP (Not published anymore) SONIA
USD LIBOR (Published until June 30, 2023) SOFR

These RFRs are daily rates. The compounded method is generally used to represent quarterly, monthly, etc. payments.

Note: In order to calculate the rate and send timely notification, some additional parameters are considered (crystallization, lag, shift, payment lag, etc.).

Beyond the computational overhead, even a single trade presents operational challenges. Indeed, it is necessary to know the latest rate for the period when the interest is paid (or received) at the time of publication. Since the RFR is based on real transactions, it will only be known once the date has passed.

Typically, the rate for day D is known on the morning of D+1, which means that without a payment lag, the payment cannot be made in time. Few solutions have been implemented on a trade-by-trade basis, and standards have yet to emerge.

  • Crystallization: A few days before the payment, the resets stop. You can then crystallize the last interest (as if it were a holiday period) or extend the calculated rate for the whole period.
  • Shift or Lag: It is assumed that the interest rate published on day D will be valid for the interest rate on day D-X. Or assume that for the period from D to D+3M, the rates D-X to D-X+3M will be used.
  • Payment Lag: The rate and interest are calculated in the ussual way, but payment is only made a few days after the end of the period.  A fixed rate or no rate is set for the payment lag.

Calculation in Fairways Debt

RFR-denominated debt and derivatives are available in Fairways Debt for loans, swaps, caps and floors. RFRs for collars will be available at a later date.

In the Market application, the compounded rate displayed for RFRs is calculated without shift or lag. For example, the rate displayed on May 25 is based on the period from February 24 to May 24.

In the Debt & Derivatives application, the lag value displayed for RFRs can be edited in the advanced options available when editing the transaction indexation.


For more information, see Apply Advanced Indexation to a Transaction.

Calculation example

Consider the example of a transaction with no change in the principal amount in a given period and the following characteristics:

  • Index: SONIA
  • Period: From July 15 to October 14, 2019
  • Fixing lag: 5 days (open days only)
  • Fixing period: From July 8 (= July 15 - 5 open days) to October 9 (= October 14 - 5 open days)

Please refer to the attached document to view the calculation data.

For cash flow simulations, visit https://www.realisedrate.com.

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