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25 votes

Difference between OIS Rate and Fed Funds Rate

Since the financial crisis of 2008-9, banks have become less willing to lend to each other for periods of more than one day. They prefer to lend `overnight', and must do this at the overnight (O/N) ...
Dom's user avatar
  • 2,167
13 votes

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

It comes down to the definition of LIBOR: London Interbank Offer Rate -> Every business day, a panel of large banks are asked by the BBA[*] (British Bankers Association) at what rate they would lend ...
Marcino's user avatar
  • 507
10 votes
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Quantlib python dual curve bootstrapping example

I reproduce the Ametrano-Bianchetti paper on dual-curve bootstrapping in Python with QuantLib in a chapter of the QuantLib Python Cookbook. (Note: I'm not sure what the etiquette is about plugging ...
Luigi Ballabio's user avatar
10 votes
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Is SOFR to replace LIBOR or Fed Fund Rate or both

The market is using SOFR discounting for all sorts of quotations already (not FF). For example, swaption vol is quoted with SOFR discounting, CME and LCH moved to SOFR PAI and discounting on Oct. 16 ...
AKdemy's user avatar
  • 9,014
8 votes

Difference between OIS Rate and Fed Funds Rate

Secured and unsecured refers to lending. However OIS is a swap based on FF, not a loan. It is a different animal. So OIS is a derivative, or a bet, based on the average of future (unsecured) FF rates ...
nbbo2's user avatar
  • 11.4k
8 votes
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Bootstrapping OIS curve

I see several problems that might explain those differences: The frequency of the fixed leg on a EONIA swap is Annual and not semi The deposit facility rate is not part of the EONIA curve. Use the ...
David Duarte's user avatar
  • 5,825
7 votes
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Why is the 1 month OIS rate so stable?

The OIS rate is the market rate that is most dependent on the Central Bank Deposit Rate (i use that as a broad term since it is called something slightly different across currencies but principle is ...
Attack68's user avatar
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6 votes
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Is there any public data to get OIS for differal time (1d, 1W, 1M, ..., 10Y)?

So you can get depo and swap rates from markit daily, at links like this: http://www.markit.com/news/InterestRates_<cncy>_<yyyymmdd>.zip i.e. http://...
will's user avatar
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6 votes
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Difference between OIS and SOFR?

The Fed Funds Effective Rate is the overnight unsecured borrowing rate between financial institutions. It is published on Boomberg's FEDL01 page. SOFR is an overnight interest rate which represents ...
dm63's user avatar
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5 votes
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Relation between OIS rate and discounting rate

No its not the Fed Funds Rate, or the Bank of England Base Rate or the ECB Refi Rate, it is the forecast, published OIS fixing index determined by the relevant authority in the currency. I.e in USD it ...
Attack68's user avatar
  • 10.7k
5 votes

FX forward curve building

Your method assumes you can borrow or lend at OIS in both currencies, but in practice you cannot. That's why there is a current basis swap market , where you lend at OIS in one currency versus ...
dm63's user avatar
  • 17.2k
5 votes

Difference between OIS Rate and Risk-Free Rate

RFR (risk free rate) is the current acronym ISDA, central banks and regulators are pursuing to signify and politicise the transition from IBOR, which has been dogged by rigging scandals. OIS (...
Attack68's user avatar
  • 10.7k
5 votes

Is SOFR to replace LIBOR or Fed Fund Rate or both

SOFR was never meant to take USD LIBOR's role, as USD LIBOR reflects unsecured funding (and is credit sensitive). An index like BSBY, on the other hand, can. BoA just started issuing FRNs linked to it....
ir7's user avatar
  • 5,043
5 votes
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Yield curve bootstrapping not producing expected cash flow start date

There are a few consistency problems. One is that you're passing 2 fixing days to the ql.OvernightIndex constructor. This way the schedule starts correctly on the ...
Luigi Ballabio's user avatar
4 votes

USD-Federal Funds for OIS swaps vs USD-Federal Funds for Basis swaps

As far as I know, it's a market convention. The two products, namely OIS swap (fixed vs floating) and Fed Fund Libor basis swap, are developed differently, so they follow different conventions. My ...
jChoi's user avatar
  • 1,164
4 votes

Difference between OIS Rate and Fed Funds Rate

The fixed leg of the OIS is an unsecured rate that is very close to Risk Free Rate (RFR) because of the combination of several reasons: it is akin to a money market term deposit rate swapped against ...
Lebaroux's user avatar
4 votes
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Set-Up OvernightIndex Quantlib

You can leave it out during the bootstrap of the curve. In that context, the index is only used to ask for its conventions. Later, if you want to forecast index fixings, you can initialize a handle ...
Luigi Ballabio's user avatar
4 votes

FX forward curve building

I agree with dm63 in that cross-currency swap (CCS) is essential for building FX forward curve. Let me add/correct two things: FX curve < 1 year can be backed out by FX forward contract. CCS is ...
jChoi's user avatar
  • 1,164
4 votes
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Hull-White Monte Carlo simulation - mean reversion function

Given a initial discount bond $P^M(0, T)$ curve, the expression for $\theta(t)$ in the Hull White Short Rate model is a know result given by: $$ \theta(t) = \frac{1}{\kappa} \cdot f'(0, t) + f(0, t) + ...
rvignolo's user avatar
  • 741
4 votes
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QuantlIb: How to use maturities in place of Tenors in OIS rate helpers Quantlib?

Use the DatedOISRateHelper class instead. It takes explicit start and end dates. (The two cases—tenor and explicit dates—needed to be implemented differently in C++...
Luigi Ballabio's user avatar
4 votes
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Discrepancy between Bootstraped Zero Rates: Gaps between Bloomberg and My Calculated Zero Rates

There are several issues with your Python code: USD SOFR swaps have a settlement lag of two business days, see the T+2 under "Settlement" in your last screen shot from Bloomberg. So the ...
user808182's user avatar
3 votes
Accepted

Bootstrapping OIS Curve with data from different days data

A curve is used to do calculations (e.g. discounting of cash flows) as of a given trade date. Bootstrapping a single curve for two different trade dates does not make sense. With the first set of ...
Antoine Conze's user avatar
3 votes

LIBOR Cessation: Construction of Term-RFRs as LIBOR Fallbacks; Forward vs. Backward Looking

Unfortunately, I cannot provide a definite answer. In the major currencies, the risk free rate working groups (US:ARRC, UK:RFRWG and the EU:RFRWG) try to promote new standards for the cash and ...
Kermittfrog's user avatar
  • 6,737
3 votes

LIBOR Cessation: Construction of Term-RFRs as LIBOR Fallbacks; Forward vs. Backward Looking

I believe that this recent paper by Andrei Lyashenko and Fabio Mercurio is going to help you! For me it was completely amazing. It seems that we can just extend the Libor Market Model in a "...
rvignolo's user avatar
  • 741
3 votes

Which risk-free rate to use for the UK?

I would use SONIA. That's the official RFR for the UK. See this BoE link: https://www.bankofengland.co.uk/markets/transition-to-sterling-risk-free-rates-from-libor
user42108's user avatar
  • 2,272
3 votes
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Which date SONIA rate to apply for today's date in an OIS swap

Firstly, note that this is a detail which changed in 2018. The BenchMark Regulations (applied from the EU reg) require that benchmarks are based on actual transactions, so Sonia changed from being a ...
Phil H's user avatar
  • 3,679
3 votes
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What is Overnight index swaps (OIS) curve

OIS is overnight index swap: fixed float swap with floating rate based on some overnight rate Traditionally (some examples): EONIA (EUR) Fed Funds (USD) RFR: New Risk free rates (secured overnight ...
AKdemy's user avatar
  • 9,014
3 votes

2 Ways to Define/Calculate "FVA"? - Same or Different? (Simple XVA Question)

Can I add my 2c: We agree that in the case of a receivable, there is a funding cost C, and in the case of a payable, there is a funding benefit B. The cost C is essentially unsecured rate minus risk ...
dm63's user avatar
  • 17.2k
3 votes
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US Treasury vs OIS rate

You raise a few separate questions. To directly answer the first question, this is called the ‘swap spread’. So for example the 10 year swap spread is currently around -30bp. (Treasury yield is 3.50 ...
dm63's user avatar
  • 17.2k
3 votes
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how is accrual calculated on the floating leg of a OIS swap

The accrued is just the product of the OIS rates observed so far: $A=N\times\prod_{i=0}^t(1+r_i\frac{n}{360})-1$ for $n$ days elapsed between business days (usually 1 or 3), $N$ notional and $r_i$ is ...
oronimbus's user avatar
  • 1,896

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