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Does anybody know what impact the replacement of EONIA with ESTER ( Euro Short TErm Rate ) will have on discounting existing or new derivatives once EONIA will be restricted as of Jan 2020? I'm interested in curve construction and how the eventual basis will be taken into account. Are there any papers discussing this topic that anyone can share?

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I believe that Eonia can still be used for discounting derivatives after 2020. Article: https://www.risk.net/derivatives/5848051/esma-eonia-can-be-used-in-csas-after-2020

If it becomes illiquid, counterparties can repaper csa's to Ester. That will cause an economic effect if there is a non zero Eonia/Ester basis.

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  • $\begingroup$ What about projection curves? Will we return to a single curve type paradigm on OIS/ESTER? $\endgroup$ – BrownianBread Nov 21 '18 at 18:28

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