Solution
1. In the current world LIBOR usage is deep & extensive with outstanding contracts running into trillions of $. Some of these contracts are expected to expire beyond the LIBOR's retirement date. This may require the contracts to be revised (with a lot of assumptions) leading to complex recalculations.
2. Revising & revaluing outstanding contracts after LIBOR's retirement is a very highly complex & complicated task as both these benchmark rates have lot of differences. For instance LIBOR is based on expected/estimated Credit Risk while SOFR is based on Risk Free rates.
3. There is no clarity on whether the Transition should be Market-driven or Regulatory driven exercise. This can lead to unstandardized approach with no proper control. LIBOR rates once were used by most of the countries but increasingly each country has started to design its own Rates leading to divergent approaches.
4. There is another risk in LIBOR's retirement that there will be an absence of data for the underlying transactions. This may lead to a repeat of the 2012 crisis when banks started manipulating their data to reap very high profits.
5. Finally the LIBOR rates are currently available in 5 currencies and with 7 maturity levels - 35 possibilities. However the SOFR is currently involved in publishing only 1 rates (Over-night rates)
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