How is compounded SOFR calculated over a 3-month period?

Compounded SOFR = [product of (1 + r_i x d_i/360) for all business days i] - 1, where r_i is the overnight SOFR rate and d_i is the number of calendar days it accrues (typically 1, 3 for Friday-Monday). The result is an effective rate for the period, not a simple average.

What is the difference between compounded SOFR in advance vs in arrears?

In arrears: interest is calculated over the current period using actual overnight rates, known only at period end (creates operational lag). In advance: uses rates from a prior identical period to calculate current payment, known at period start. In-advance provides payment certainty; in-arrears is more theoretically correct.

SOFR30A Compounding Calculation

Calculate compounded SOFR over an interest period using daily overnight SOFR fixings, the standard methodology for SOFR-linked floating rate notes and syndicated loans under ARRC conventions.

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Frequently Asked Questions

How is compounded SOFR calculated over a 3-month period?

What is the difference between compounded SOFR in advance vs in arrears?