An Ancient Ancestor of the U.S. Secured Overnight Financing Rate Determination: The Florin Fix
Multinational Finance Journal, 2023, vol. 27, no. 3/4, pp. 50-67 | https://doi.org/10.5281/zenodo.14956550
Iordanis Karagiannidis, Tommy and Victoria Baker School of Business, The Citadel, USA
G. Geoffrey Booth, Eli Broad College of Business, Michigan State University, USA and Tommy and Victoria Baker School of Business, The Citadel, USA
Abstract:
The Secured Overnight Financing Rate (SOFR), defined by the U.S. Alternative Reference Rates Committee (ARRC) and now used by the U.S. Federal Reserve instead of the London Interbank Offer Rate (LIBOR) because of a loss of faith in its veracity, has clear and strong historical roots. Its calculation is closely related to that of the florin-denaro daily exchange rate that the Arte del Cambio (moneychangers guild) developed and implemented in the Repubblica Fiorentine (Florence) city-state located in what is now Italy from 1252 to 1532. This paper explores the how SOFR is defined and calculated by the U.S. Federal Reserve and its economic and mathematical relationship to what has become known as the Florin Fix, i.e., the calculation of Florences’ exchange rate between its gold florin and silver billon denari.
Keywords : SOFR; LIBOR; Benchmarks; Market Microstructure; Banking; Economic and Monetary Policy; Late Middle Ages and Early Renaissance; Economic History
Citation (Format 1)
Karagiannidis, Iordanis, and G. Geoffrey Booth, 2023, An Ancient Ancestor of the U.S. Secured Overnight Financing Rate Determination: The Florin Fix, Multinational Finance Journal 27, 50-67.
Citation (Format 2)
Karagiannidis, I., Booth, G., 2023. An Ancient Ancestor of the U.S. Secured Overnight Financing Rate Determination: The Florin Fix. Multinational Finance Journal 27, 50-67.