The RFR replacing USD LIBOR is SOFR. Although it has been decided that USD LIBOR transactions will turn to SOFR in the future, LCH collateral interest rate will also turn to SOFR. But compared with LIBOR, SOFR's trading volume is still very low. ? Of course, transactions such as SOFR bonds and SOFR swaps may increase further in the future.

In this regard, the market is undergoing a comprehensive system transformation to build the SOFR yield curve. Global financial institutions should have been completed. Bloomberg system can also generate SOFR yield curve.

The products used to generate the yield curve are short-term interest rate futures and long-term FF-SOFR basis swap.

For SOFR futures, the relative liquidity of about 6 months is relatively high. There are 1M and 3M SOFR futures, both of which can be used. Bootstrap method is used in 1M and 3M respectively, and the final results are combined into one.

Here, because SOFR is an overnight index, the index term is only overnight (O/N), and there is no concept of term basis. Fixation is done through on, accumulated and finally paid in one lump sum at floating interest rate. Payment terms are 1M and 3M.

It should be noted that the daily fixing and accumulation methods between 1M and 3M are slightly different.

? The arithmetic average of SOFR 1M futures payment is floating interest rate.

? SOFR3M futures pay compound interest.

The arithmetic mean needs to be adjusted by convexity, which is similar to the FF branch of the current FF-Libor basis exchange.