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KPMG Whitepaper: SOFR and Credit Spread

The adoption of the secured overnight financing rate (SOFR) is forcing firms to think about credit spreads and how to apply them to new and old transactions. While some firms may default to existing processes to determine credit spread, the structural and behavioral differences between Libor and SOFR are compelling others to rethink the traditional approach. Any reformulation of a firm’s credit spread methodology will also require a reassessment of pricing strategies and conduct risk implications, in addition to operational impacts.