Document Type
Article
Publication Date
2025
Publication Title
Applied Economics Letters
Keywords
SOFR, ESTR, EONIA, reference rate, Fed Funds Rate
Abstract
EUR and USD overnight risk-free rates (RFRs) have undergone a period of change, with EONIA being replaced with ESTR and Fed Funds Rate (FFR) being replaced with SOFR. We conduct a comparative analysis of the representative power of EONIA vs. ESTR and FFR vs. SOFR regarding market confidence and guidance on market expectations. Our results imply a significant difference between the US and the Eurozone. ESTR-EONIA displays similar characteristics, whereas FFR-SOFR displays different characteristics. SOFR is a superior market indicator to its predecessor and more effectively reflects market confidence than the FFR. However, none of the four RFRs displays forecasting power. New benchmark rates are not superior to their predecessor at capturing market behaviour, especially for ESTR vs. EONIA.
Funding Source
This research is funded by the Research Support Fund of the Illinois State University Department of Finance, Insurance, and Law. This article was published Open Access thanks to a transformative agreement between Milner Library and Taylor & Francis.
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
DOI
10.1080/13504851.2025.2517794
Recommended Citation
Oygur, T., Kirik, A., & Erzurumlu, Y. O. (2025). Secured or unsecured: that is all matters - practical implications of new reference rates. Applied Economics Letters, 1–5. https://doi.org/10.1080/13504851.2025.2517794
Comments
First published in Applied Economics Letters (2025): https://doi.org/10.1080/13504851.2025.2517794