SOFRhoz

SOFRhoz is a term that emerged in financial markets to describe a specific type of interest rate swap. It refers to a swap where one party pays a fixed interest rate and the other party pays a floating rate based on the Secured Overnight Financing Rate, or SOFR. SOFR is a benchmark interest rate that replaced LIBOR in the United States for new overnight transactions.

The "hoz" component of SOFRhoz is derived from the term "horizon," indicating that these swaps are typically entered into for a specific duration, or horizon, beyond the overnight period. This allows market participants to hedge against interest rate risk or speculate on future interest rate movements over a defined timeframe.

SOFRhoz swaps are becoming increasingly important as the financial industry transitions away from LIBOR. They provide a way for companies and financial institutions to manage their exposure to floating interest rates in a post-LIBOR world. The adoption of SOFR as a benchmark reflects a move towards a more robust and transparent interest rate system. Understanding SOFRhoz is therefore crucial for those involved in fixed-income trading and risk management.