The search for a new reference rate

Ahmed Baig, Drew B. Winters

Research output: Contribution to journalArticlepeer-review


The LIBOR manipulation scandal of 2008 spurred extensive policy debates regarding the importance of market-based reference rates. The alternative reference rates committee (ARRC) eventually identified the secured overnight financing rate (SOFR) to be a suitable replacement to LIBOR. In this study, we question the underlying process behind the choice of SOFR as a replacement for LIBOR. Both academic literature and regulatory bodies fail to identify a consistent definition and criteria of a good reference rate. We fill in this gap in the literature by providing an empirically testable ‘checklist’ to evaluate any potential money market rate to gauge its suitability as a reference rate. We also carry out an empirical evaluation of various money market rates against our criteria and identify the 1-month AA non-financial commercial paper rate as the best available replacement for LIBOR.

Original languageEnglish
JournalReview of Quantitative Finance and Accounting
StateAccepted/In press - 2021


  • Benchmark rate
  • Calendar regularities
  • LIBOR replacement
  • Reference rate
  • SOFR


Dive into the research topics of 'The search for a new reference rate'. Together they form a unique fingerprint.

Cite this