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An overnight indexed swap (OIS) is an interest rate swap (IRS) over some given term, e.g. 10Y, where the periodic fixed payments are tied to a given fixed rate while the periodic floating payments are tied to a floating rate calculated from a daily compounded overnight rate over the floating coupon period. Note that the OIS term is not ...
The new rates are posted in the morning and include the latest overnight rate along with the 30-, 90-, and 180-day average rates. The SOFR Index also gets updated, which shows the cumulative ...
SONIA (Sterling Overnight Index Average) is the effective reference for overnight indexed swaps for unsecured transactions in the Sterling market. SONIA is a risk-free rate . [ 1 ]
The reason for the change is that, post-crisis, the overnight rate is the rate paid on the collateral (variation margin) posted by counterparties on most CSAs. The forward values of the overnight rate can be read from the overnight index swap curve. "OIS-discounting" is now standard, and is sometimes, referred to as "CSA-discounting".
An interest rate swap's (IRS's) effective description is a derivative contract, agreed between two counterparties, which specifies the nature of an exchange of payments benchmarked against an interest rate index. The most common IRS is a fixed for floating swap, whereby one party will make payments to the other based on an initially agreed ...
Secured Overnight Financing Rate (SOFR) is a secured overnight interest rate. SOFR is a reference rate (that is, a rate used by parties in commercial contracts that is outside their direct control) established as an alternative to LIBOR. LIBOR had been published in a number of currencies and underpins financial contracts all over the world.
For discounting, the overnight indexed swap (OIS) curve is typically used for the "risk free rate", as opposed to LIBOR as previously; see Interest rate swap § Valuation and pricing. Relatedly, the "Multi-curve framework" is now standard in the valuation of interest rate derivatives and for fixed income analysis more generally.
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