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23 votes

Difference between OIS Rate and Fed Funds Rate

The OIS represents the cost of repeated overnight unsecured lending over periods of up to two weeks (sometimes more). Whether it is secured or not depends on which of the overnight rates it is linked ...
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12 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 ...
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  • 487
9 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 ...
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9 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 ...
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  • 4,493
7 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 ...
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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 ...
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  • 8,047
5 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 ...
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  • 5,285
5 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://...
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  • 2,406
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 (...
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  • 8,047
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 ...
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  • 1,060
4 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 ...
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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 ...
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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 ...
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  • 1,060
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) + ...
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  • 711
4 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 ...
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  • 8,047
4 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....
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  • 5,028
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++...
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3 votes
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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 ...
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3 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 ...
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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 ...
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  • 5,763
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 "...
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  • 711
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
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  • 2,076
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 ...
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  • 3,589
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 ...
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  • 4,493
2 votes
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TOIS (CHF), TONAR (JPY), AONIA(AUD) in Quantlib

Not all overnight indexes were given a specific class. As a workaround, you can create an instance of the OvernightIndex class and pass it the relevant parameters (...
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2 votes
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OIS Discount Factor Bootstrapping - Do we assume simple interest?

An OIS interest rate swap rate with annual-annual freq is determined under one year by: $$1 + d_i s_i = \prod_{j=1}^{n(i)}(1+ d_j r_j) \; , \quad \text{where} \quad d_i = \sum_{j=0}^{n(i)} d_j \;.$$ ...
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  • 8,047
2 votes

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

Suppose you wanted to value a 5Y EUR IRS with a USD cash collateralised curve this is the broad process: Get the 5Y EUR 3M / OIS basis, say this is 10bps: This establishes the discounting basis in ...
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  • 8,047
2 votes

Is there any public data to get OIS for differal time (1d, 1W, 1M, ..., 10Y)?

CME (as of now) also publishes it. Folder: ftp://ftp.cmegroup.com/irs/ file name: irs_close_quotes_OISUSD_YYYYMMDD.csv, e.g. 20200717 CURVE_NAME,TENOR,RATE USD LIBOR-OIS DISCOUNT CURVE,2 Years,0....
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2 votes

Difference between IRS and OIS

A corporate that has an ISDA master agreement to trade Interest Rate Rwaps (IRSs) with a bank will undoubtedly be capable of also trading Overnight Indexed Swaps (OISs), as will any type of ...
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  • 8,047
2 votes

Black Scholes- Options and OIS

When you say the Black Scholes formula for currency options, I assume you are referring to the Garman-Kohlhagen formula described here. Note that this formula is based on the interest rate ...
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