Advocate Capital CEO on How SOFR Could Skew Markets

The video discusses the transition from LIBOR to SOFR, highlighting the differences and challenges faced by investors, issuers, and banks. It explains the regulatory restrictions on term SOFR and the resulting basis risk, which could lead to systemic issues if not addressed. The video also covers market reactions and the potential for increased risk over time due to the inability to offset basis risk effectively.

In what ways can the lack of offsetting flows increase basis risk over time?

What are the implications of regulators' restrictions on creating synthetic term liabilities?