SOFR stands for Secured Overnight Financing Rate and is a rate at which banks charge each other for short-term loans. It is rapidly replacing LIBOR (London Interbank Offered Rate) as the basis for over $370 trillion of financial products in five different currencies. The main difference between SOFR and LIBOR is that SOFR is based on completed transactions, rather than LIBOR's reliance on self-reported quotes from financial institutions. This makes SOFR far less susceptible to manipulation. Additionally, SOFR is calculated using Treasury repurchases, which average between $2 and $4 trillion in volume on a daily basis, according to a 2020 report from The Brookings Institution. Lastly, SOFR does not include a credit risk premium in its calculation, as it’s a secured rate. Many analysts anticipate loan rates will include a credit spread to account for this change.