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Questions tagged [ois-discounting]

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0
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1answer
60 views

Libor Market Model Implementation

I'm trying to implement an LMM-MultiCurve for caplet pricing following the analytical formula mentioned in this article (pg 20): https://www.researchgate.net/publication/...
1
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1answer
102 views

ESTER replacement for EONIA/EURIBOR

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 ...
2
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1answer
577 views

Dual Curve Bootstrapping - When to OIS discount?

I am a new quant and I am trying to understand some of the specifics of dual curve bootstrapping. For concreteness, suppose I want to build a Libor forward curve. From what I understand OIS ...
3
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1answer
465 views

Cheapest-to-deliver (CTD) discount curve

Can someone explain, in layman's terms, the mechanics (the algorithm steps) of the construction of the discount curve in the case when the CSA allows the posting party to choose a currency (from a ...
1
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1answer
92 views

Lattice pricing of derivatives under multi curve framework (OIS and LIBOR)

My goal is to price various derivatives resetting to 1M and 3M LIBOR via using a lattice. I have calculated an OIS curve for discounting and adjusted 1M and 3M LIBOR forward curves to be consistent ...
0
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1answer
395 views

How to use USD OIS discounting for local currency uncollateralised swaps?

I am wanting to do MTM valuations of uncollateralised swaps as our banks have switched to using the USD OIS curve for their discounting (assuming no xVA adjustments). None of the cashflows we are ...
0
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1answer
107 views

How do I value uncollaterised swaps?

Do I need to discount using the OIS curve? Then add some sort of FVA adjustment over and above the CVA/DVA? How do I work out a banks cost of funding? Any help would be greatly appreciated. ...
0
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1answer
318 views

What discount rate for uncollateralized cross currency swaps?

To expand on this question, what happens if the uncollateralized swap is of a cross currency variety? Ignoring any xVAs, it's unclear which currency would best determine the discount rate: a) we ...
0
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1answer
298 views

OIS Discount Factor Bootstrapping - Do we assume simple interest?

When I am reading papers (ie here and here) on bootstrapping discount curves they refer to obtaining discount factors from rates for swaps maturing less than a year with: $$D(t, T_i) = \frac{1}{1+s_i(...
0
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1answer
555 views

Collateralized Interest Rate Swap

I am struggeling with the wording "Collateralized" IRS and try to get an understanding out of it based on an example. Especially what it means that in the multi curve models the expectations are ...
1
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1answer
100 views

Which volatility to use in cap pricing with CSA discounting?

I'm currently trying to price a cap on a Libor 3M (US) collateralized in EUR. I understand that my discount curve should be the CSA and the price of a caplet should be using a Black-scholes price: $$...
1
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3answers
1k views

How to compute Overnight Index Swap (OIS) fixed rate?

I understand that periodically participants exchange the difference in the fixed rate and the daily compounded overnight floating rates. My question is how should one compute the fixed rate? What ...
0
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2answers
111 views

Swap rates comparison

I'd like to compare the swap rates using OIS discounting $S_{a,b}^{OIS, 6M}$ and a swap rate $S_{a,b}$ not using OIS discounting: $$S_{a,b}^{OIS, 6M}=\sum_{a+1}^b L_{6M}(0,T_i,T_{i+6M})\times df^{OIS}...
4
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0answers
345 views

Equations for multicurve calibration with OIS discounting

I am trying to calibrate my forecast and discount curves using the multi-curve approach with OIS discounting. To do so, I have a implemented multivariate Newton-Raphson root finder. I am finding a bit ...
3
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3answers
2k views

Why do we discount in ois and not treasuries

OIS is the 1-day non-collateralized interbank interest rate. Such a rate is not risk-free. The market trades a very useful curve that is much closer to "risk-free": the government bond curve. So the ...
3
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1answer
2k views

Quantlib python dual curve bootstrapping example

Apologies if this has been asked in the forum (I couldn't find any examples)- Can someone please point me to a worked example in python using Quantlib for dual curve bootstrapping (using EONIA for ...
1
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1answer
481 views

How were OIS discount curves built before long-term OIS were liquid?

Many sources put the switch from LIBOR discounting to OIS discounting at some point in 2008, or perhaps a little earlier (the earliest I have seen is August 2007). It seems that this may be optimistic,...
2
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1answer
823 views

Which discount curve to use when valuing multi currency swaps

I've been looking around the internet but cannot find the exact answer to my question. Normally when valuing an IRS one uses eonia (for eur swaps) to discount the cashflows. Let's imagine I have a ...
4
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1answer
1k views

Risk-free: why LIBOR pre-crisis and OIS now

Quick question as a follow-up to this post: why was LIBOR used instead of OIS pre-2007 for the risk-free rate proxy? Please correct me if I am getting this mixed up, but from what I've seen, it ...
0
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1answer
456 views

Starting short-end OIS zero curve building

I understand the concept of bootstrapping and building the curve when we have the values for first few maturities. However, I can't quite get how the initial values for zero curve rates are derived ...
2
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1answer
244 views

LMM & multiple curves

I was reading through a paper that attempted to present a theoretical explanation for the divergence in value of different LIBOR tenors (and thus for the use of different curves for different tenors). ...
5
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3answers
4k views

CSA discounting vs OIS discounting

In the fixed income literature, is the CSA discounting the same as OIS discounting? Seems they're referring to the same thing, but couldn't find an explicit statement confirming it.
2
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1answer
208 views

Dual discounted forward curve

I was wondering how to calculate the forward rates based on OIS discounting for the half year terms. I know how to do this for the full year terms -> just making sure that the two legs are equal to ...
0
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1answer
837 views

One Way CSA Agreements

This is probably an older topic but I don't seem to find any related threads on this forum. What is the best way to value, let's say, a vanilla IR swap (you receive fixed) that you trade against a ...
3
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1answer
696 views

Derive OIS rate from IRS rate and Fed Funds/Libor basis spread

For example I have 7Y interest rate swap rate and 7Y Fed funds/Libor basis spread. What is the step-by-step procedure to derive OIS rate from these two?
1
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1answer
3k views

Libor OIS basis swap equation

I'm a little embarrassed about this because I have a PhD in math, but I'm having a little trouble working out how to bootstrap an OIS curve from libor rates and basis swap rates. If I had an equation ...
5
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3answers
4k views

Why is CSA currency OIS rate used in discounting instead of local currency OIS?

I have been struggling to understand the logic behind cross currency OIS discounting (where cash flows happen in different currencies than the collateral is paid). I will illustrate my question ...
1
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2answers
324 views

OIS & LIBOR swap

Why do people use OIS and LIBOR swap spread to compare/value bonds/derivatives? Why not just use US treasury?
1
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0answers
141 views

forward curve and cap/floors in nowadays environment

I'm currently trying to get the implied volatility of a vanilla Euro floor with maturity 1Y with data from bloom. I have the price ( which is not supposed to take into account the first floorlet ...
2
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1answer
475 views

Building curves using onshore or offshore JPY overnight rates?

I am trying to build Japanese Yen interest rate curves. When defining the curve instruments for the 'OIS' (discount) curve (aka TONAR), I am uncertain as to which rate to use for the overnight deposit ...
2
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2answers
1k views

Curve Euribor - Euribor 3M

I'm setting up some Euribor 6M and Euribor 3M curves. So far i have all the data and quotes i need, but i'm having trouble defining the firsts points of the curve. I'm currently using 6M Euribor and ...
2
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1answer
606 views

Comparison of multicurve calibration methods

It seems that there are mayor softwares around offering a multicurve framework based on bootstrap. I find this puzzling nowadays, given the distinct advantages of best-fit optimization methods and ...
11
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4answers
8k views

Rationale for OIS discounting for collateralized derivatives?

Can someone explain to me the rationale for why the market may be moving towards OIS discounting for fully collateralized derivatives?