I am tormented concerning the pricing of an OIS (USD). My concern is how do we find the rate of the fixed leg using Federal Funds rates, at t=0 since these are not known at that time.

Thank you

  • 2
    $\begingroup$ you build a curve and forecast them. $\endgroup$
    – Attack68
    Nov 19, 2023 at 11:09
  • $\begingroup$ Really ? I thought that OIS are valuation following no arbitrage principles $\endgroup$
    – EconFox
    Nov 19, 2023 at 14:05
  • $\begingroup$ Related: quant.stackexchange.com/questions/29644 . In general, not necessaily applicable to your question, sometimes you need to need to calculate the official mark to market and P&L shortly after NY close, but that uses an observable/effective rate that is not officially published until 8am NY the next day. You can get an estimate of the observable rate from a data vendor and use that in your calculations; then the next day recalculate the mtm using the official published rate and include any mtm change as an adjustment in the next day's P&L. $\endgroup$ Nov 19, 2023 at 16:00
  • $\begingroup$ ~So the quoted OIS rates as of today are just estimates ? $\endgroup$
    – EconFox
    Nov 19, 2023 at 16:24
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    $\begingroup$ E.g. bloomberg.com/quote/FDFD:IND esimates the official EFFR (not OBFR) to be published the next NY morning newyorkfed.org/markets/reference-rates/… "The ICAP Fed Funds rates (Bid/Ask) are posted by the ICAP Fed Funds Desk. These rates are general indications and are determined by using the levels posted to the desk by highly rated large domestic and international banks. The trading day generally begins at 7:30 am and continues until the fed wire closes, typically at 6:30 pm." $\endgroup$ Nov 19, 2023 at 16:44


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