hard · Debt Capital Markets bond-instruments-structures
What is 'Observation Shift' in a compounded SOFR calculation?
- A method where the weights (the number of days) in the compounding formula are based on the business days in the shifted 'observation' period.
- The routine practice of deliberately ignoring the published SOFR fixing that is observed on the very last Friday of every calendar month.
- A shift in the bond's yield-to-maturity that is directly driven by a measurable change in the instrument's modified duration over its life.
- A discretionary manual adjustment made by the syndicate desk so that the new-issue concession offered to investors stays appropriately attractive.
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