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8

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 2020 on new AND legacy swaps. For EUR cleared, major CCPs did this since July 27 2020. The market switched to discounting with the relevant RFR rates on the ...


5

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 Eonia rate. You are calculating rates with simple compounding and not annual compounding Here is an alternative implementation: tenors = [ '1D', '1W', '2W', '...


5

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 (overnight index swap) is the acronym that has been associated with an unsecured overnight interbank cash lending rate fixing (OIS fixing) (with different calculation ...


4

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: $$ \theta(t) = \frac{1}{\kappa} \cdot f'(0, t) + f(0, t) + \frac{1}{2} \cdot \left( \frac{\sigma}{\kappa} \right)^2 \cdot \left( 1 - e^{-2 \kappa t} \right). $$ I have used a notation where the spot rate dynamics is ...


4

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. A BSBY-SOFR basis swap was also struck a month ago.


3

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


3

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 funding rate): ESTA (EUR) SOFR (USD) In terms of what these curves look like: Reference is the underlying OIS. The curve uses instruments (Futures, Swaps) to ...


3

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 "simple" manner to cope with the new RFR because we can define an extended numeraire $P(t, T)$ for $t > T$ that recovers Ibor-like properties, such as the ...


3

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 derivatives markets. Further, there exist recommendations from various industry bodies how to incorporate (lagged) SONIA/SOFR(/ESTR) in new contracts. As an example, ...


2

From Pricing and Hedging Swaps by Paul Miron and Philip Swannell: Here I will take the input rates: $r_{1y}$, $r_{2y}$, $r_{3y}$ and create the DF values for each tenor $df_{1y}$, $df_{2y}$, $df_{3y}$, and thus create the zero coupon swap curve rates $z_{1y}$, $z_{2y}$, $z_{3y}$. The book demonstrates how this formula represents both the fixed and floating ...


2

By definition, the overnight rate is the rate at which banks lend to each other overnight. Overnight index swaps (OIS) allow banks to 'lock in' the cost of funding overnight for a specific term. They exchange a predetermined OIS rate for a payoff equal to the growth of the notional amount of money lent at the overnight rate for a specific term. The overnight ...


2

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 term rate for overnight published today for tonight, to being an in-arrears rate published tomorrow for tonight. The rate for some date (the index for that day) ...


2

Another apology, I won't be able to give a definite answer either but in case of IR swaps I believe the following applies: legacy (i.e. IBOR linked) contracts: the fallback protocol has been launched by ISDA last month and Bloomberg had been selected as fallback spread vendor a while back. In case LIBOR ceases to exist, the fallback rate is the compounded ...


1

Just use meeting date OIS - cleanest way to do it. Sources: inter-dealer brokers such as ICAP, banks, data vendors such as Bloomberg or Reuters.


1

ICVS 133 on BBG as a zero coupon curve for EUR OIS (so you wouldn't need to bootstrap). If you export to Excel, the discount factors are already in the exported sheet.


1

This is my most up-to-date understanding of the matter: (i) OIS Swaps are here to stay. Already today, in the US, there two types of OIS Swaps, ones indexed to the Effective Federal Funds Rate (EFFR) and ones indexed to the Secured Overnight Financing Rate (SOFR). Both these swaps work the way you have described (floating based on Geometric Average of daily ...


1

Isn't the "Risk-Free-Rate" (RFR) just a rebranding of LIBOR/EURIBOR, as was? IE these are not "risk-free" so much as interbank, ie the "liquid benchmark for very-short-term very-low-risk". Unless you work in the fixed-income department of an investment bank, the distinction is probably superfluous; so genuinely not worth ...


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