4

It's done in 2 steps: 1) First you bootstrap OIS curve independently from Libor curve, get OIS discount factors 2) Then use these to bootstrap Libor curve (using OIS discount factors instead of Libor ones,Libor used for projections only)


3

I notice you mention GBP. This effect is particularly apparent there since a large number of insurance, pension and asset management companies like to trade ZCS. They do this because the forward risk profile of a ZCS more accurately reflects the increasing notional of their portfolio and avoids them having to deal with interim coupon payments. They almost ...


3

I try to keep your enumerated structure yet address the points you edited into the question: (i) I only know of USD OIS referencing the EFFR and the SOFR (ii) My perception is that EFFR als float leg reference is far more liquid at the moment (compare the traded volumes, e.g. https://apps.newyorkfed.org/markets/autorates/fed%20funds vs. https://www.cmegroup....


2

This depends very much on the instruments used and the methodology to construct the multi-curve. For example common practice would be to use IRS and Single Currency Basis swaps to simultaneously solve for the OIS curve. In that scenario changing IRS rates would directly impact the OIS curve, whilst maintaining the same separation via the constant basis ...


2

"US banks fund themselves via EFFR (Effective Federal Funds Rate), as well as the Secured Overnight Financing Rate (SOFR)" Bank funding is only partly via Fed Funds - there were many important structural changes to that market post-GFC which I believe reduced bank participation in the market. See, for example, this paper: https://www.clevelandfed....


2

I think a little clarity is needed here. A swap means exchanging A for B. Swaps trade on anything and everything. You can trade IOS/BBA Muni swaps, you can trade a swap linked to the gold forward levels versus Euribor 9 month fixings. Whatever you want. You have a mistake above. OIS swaps are not OIS vs Libor. Generally, when someone trades an ...


1

The Fed convened the ARRC (Alternative Reference Rate Committee) in I think 2015 to begin the process of transitioning the financial markets away from Libor. Why? Because Libor had been manipulated , on account of the fact it was based on a poll rather than being sampled from a large , liquid market. The Committee, whose minutes are public, selected SOFR ...


1

iii) The OpenGamma piece on IRS market conventions might help. https://quant.opengamma.io/Interest-Rate-Instruments-and-Market-Conventions.pdf [EDIT or USSO2 BGN Curncy DES, for e.g., which provides details on the conventions for each leg] iv) Yes, SOFR/FF basis swaps trade OTC. Or you can trade SOFR futures vs. Fed Funds futures.


1

The discount factor is just 1 divided by the interest rate. 1y Swap rate = 0.38% => the effective interest rate is 1.0038. Therefore the discount factor is: $$DF(1y) = \frac{1}{1.0038}=0.99621$$. You can do the same for the other years. Edit: just for completeness, I should add that for the second year, you need to square the annualized rate and for the ...


1

The price of something under OIS discounting is (supposed to be) the expectation of its value under a particular measure, which specifies the measure and the interest rate of the collateral account etc. So given the price of a set of ATM Libor IRS and their relevant discount curve, the immediate thing to do is to infer the markets' expectation of forward ...


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