Floating rate: isn’t really a loan that floats every day (interest rates) rather every regular

period within its terms (most common, quarterly)

Average the rates of each bank

Reference rate: reflect the cost of each of the bank to fund their individual participation. It
was not based on deposit, but based on how much the bank would be charged from
borrowing from other banks in the market
(whole-shale money market: bank borrowing from other banks).

Libor the cost of money in the market, it’s just one number, but does it reflect all the bank?
No

At the time bank used to loan full-time

The quotes in LIBOR were given 2 days before the START of the interest period (forward
looking). The margin doesn’t change in Q2 but the quotes may change.
SONIA is an overnight rate, it’s given daily and project it moving forward, delayed period. So
it starts 5 days before, so 5 days before the end of the interest period, it’s the day you’ll be
told how much interest you’d have to pay 5 days before the END of the period.

The regulators believe that the replacement for LIBOR has to be replaced by real market
transactions. This is why the market has turned into an overnight market.

SOFR secured rate, it’s lower than SONIA’s that produces unsecured rates.

CAS (credit adjustment spread) for SONIA