SOFR Academy Publishes White Paper on Across-the-Curve Credit Spread Indexes (AXI & FXI) to Aid LIBOR Transition

NEW YORK–(BUSINESS WIRE)–#AXI–SOFR Academy, Inc., a digital education and data provider, announced the publication of additional materials regarding the Across-the-Curve Credit Spread Indexes (AXI). The indexes are robustly defined, forward looking credit-sensitive spreads added to the Secured Overnight Financing Rate (SOFR) to support the transition of loan products away from the US-dollar London Interbank Offered Rate (LIBOR). The additional materials include an AXI Technical White Paper and, with the permission of the Loan Syndications and Trading Association (LSTA), a draft Term SOFR + AXI concept credit agreement.

The AXI Technical White Paper contains details on AXI construction methodology, Term AXI rates, historical performance, underlying transaction volumes, fallback language and more. The White Paper is available for free download here.

The Term SOFR + AXI concept credit agreement document, produced with permission from the LSTA, provides a detailed illustrative example of a credit agreement that references CME Term SOFR + AXI for a syndicated term loan facility denominated in U.S. Dollars. The Term SOFR + AXI concept document is available for free download here.

AXI will be helpful for the business loan market—particularly multi-lender facilities, middle market loans, and trade finance loans—where transitioning from LIBOR to an overnight rate has been difficult. “There are no longer enough transactions with which to calculate LIBOR. That is because banks now fund themselves further out the yield curve,” said Marcus Burnett, Chief Executive of SOFR Academy. “The transition from LIBOR should be done once and it must be done right”, added Burnett.

In a letter to the Alternative Reference Rates Committee (ARRC), SOFR Academy committed to operationalizing AXI in a considered and measured way that incorporates feedback and guidance from a wide range of stakeholders and prioritizes the stability of the global financial market.

About the Across-the-Curve Credit Spread Indexes (AXI & FXI)

AXI was discussed during the Federal Reserve Bank of New York’s Credit Sensitivity Workshops, which were intended to explore a credit sensitive add-on to SOFR. AXI was conceived in an academic paper by Professor Antje Berndt, Professor Darrell Duffie, and Dr. Yichao Zhu. Qualitatively, the index is a measure of the recent cost of wholesale unsecured debt funding for publicly listed U.S. bank holding companies and their commercial banking subsidiaries. Quantitatively, the index is a weighted average of credit spreads for unsecured debt instruments with maturities out to five years, with weights that reflect both transactions volumes and issuance volumes. FXI is an extension of AXI that incorporates transaction data for non-bank issuers which scales up the dollar volume covered transaction by a factor of nearly 500%. The resulting FXI spreads are highly correlated with AXI, especially over the past few years (Berndt, Duffie and Zhu, 2020).

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About SOFR Academy

SOFR Academy is a U.S. based digital education and data provider. SOFR Academy’s panel of advisors includes academics from Harvard University, the MIT Sloan School of Management, the University of California Berkeley, New York University and Tsinghua University as well as experienced financial services professionals. SOFR Academy is a member organization of the LSTA, the Bankers Association for Finance and Trade (BAFT), the Asia Pacific Loan Market Association (APLMA) and the International Swaps and Derivatives Association (ISDA). The Firm is backed by leading venture-firm 8VC, and is based in New York.

About the Secured Overnight Financing Rate

SOFR is published by the Federal Reserve Bank of New York and is subject to The New York Fed Terms of Use. The New York Fed has no liability for your use of the data. AXI is not associated with, endorsed, or sponsored by The New York Fed.

Legal Disclaimer

SOFR Academy reserves all rights in the methodologies and outputs disclosed in this document, the white paper, the updates to the white paper and on SOFR Academy’s website. None of these rights may be used without a written license from SOFR Academy. SOFR Academy holds the exclusive word-wide rights to commercialize the intellectual property (IP) associated with AXI, this includes but is not limited to the literary work, the algorithm / code, all trade secrets, know-how, trademarks, designs, copyright, whether or not registered or registrable or having to undergo any other process for grant, registration or the like.



Jorge A. Cosano-Martinez

Telephone +1 855 236 6106

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