LIBOR

LIBOR is the London Interbank Offered Rate – used for many decades in a wide variety of financial products like small business loans and adjustable rate mortgages. LIBOR is being phased-out in favor of the Secured Overnight Financing Rate (SOFR).
Why is it being phased-out?
Mostly because of it’s volatility and lack of transparency. As a result, many industry participants and regulators have been pushing for a replacement for years. By December 31st of this year (2021), firms will no longer be writing new contracts that reference LIBOR, and USD LIBOR settings will cease to exist after June 30, 2023.
What does this mean?
This means that securities and derivatives whose underlying asset is traditionally based on LIBOR (some commercial loans for example) will now be based, or tied to to SOFR. The assumption is that SOFR will help provide greater transparency and subsequently less risk on loans and securities tied to it.