The Secured Overnight Financing Rate (SOFR) is a benchmark interest rate for dollar-denominated derivatives and loans, which is based on actual observable transactions. Unlike LIBOR, which is based on estimates provided by a panel of banks, SOFR is derived from the Treasury repurchase market, which is a highly liquid and active market. This means that SOFR is based on a large volume of actual transactions, making it a more reliable and transparent benchmark. The use of actual transaction data reduces the risk of manipulation that was a concern with LIBOR, which was based on estimates rather than actual transactions. Therefore, the main advantage of SOFR over LIBOR is its basis on actual observable transactions, not estimates.

Choice A is incorrect. While it's true that SOFR is based on a larger collection of banks, this isn't the primary advantage of SOFR over LIBOR. The main advantage lies in its basis on actual observable transactions rather than estimates.

Choice B is incorrect. The ease of computation isn't the primary reason for the transition from LIBOR to SOFR. Both rates involve complex calculations and require sophisticated financial knowledge to understand and compute.

Choice D is incorrect. Although SOFR incorporates some risk measures, it does not provide a built-in hedge against default risk. Its main advantage over LIBOR lies in its transparency and reliability as it's based on actual observable transactions.