7 votes
Accepted

Libor transition: Building SOFR discount curve

OIS Discounting: First note that we already discount using USD OIS rates, but these would be OIS rates constructed from USD OIS Swaps linked to the Effective Federal Funds Rate (EFFR). In other words, ...
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  • 4,961
5 votes
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Term SOFR rate formula

The issue is data ownership and transparency in my view. Whilst OIS-swaps do give a more accurate view of the daily RFR rates that will compound to yield the Term SOFR reference rates, the OIS swaps ...
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  • 8,007
4 votes
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Is there a difference between JPY TONA and JPY TONAR?

This document from Japanese bank Mitsubishi UFJ states they are one and the same rate, see page 3 $-$ my emphasis: TONAR (Tokyo Overnight Average Rate), the RFR for JPY also called TONA, is a pre-...
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3 votes

The exact mechanics of USD OIS Swaps: SOFR, EFFR & Libor cessation

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 ...
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  • 2,403
3 votes
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The exact mechanics of USD OIS Swaps: SOFR, EFFR & Libor cessation

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 ...
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  • 553
2 votes

Risk-free interest rate for option pricing from treasury yield curve rates

Best practice nowadays is to use Fed Funds rates to discount. If you only have Treasury rates , this will be quite close for 0-3 year expirations, since those Treasuries trade quite close to FedFunds....
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  • 13.7k
2 votes
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Current liquidity of USD OIS-SOFR Swaps

I like this particular blog on rates: https://www.clarusft.com/blog/ Specifically, here is post with some info on SOFR swaps liquidity. There is a section in this post on SOFR volumes by tenor: https:/...
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  • 910
1 vote

Relationship between risk free rate and credit spread in the Merton model

By formula (14) in Merton (1974) the difference of the yield to maturity $R(\tau)$ of the firm's risky debt and the riskless rate $r$ is $$\tag{14} R(\tau)-r=\frac{-1}{\tau}\log\Big\{\Phi[h_2(d,\sigma^...
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  • 1,429
1 vote

which market instruments are used to strip the SOFR curve under 1 year?

The trading is being more and more active on 1-month and 3-month SOFR Futures. These quotes should help bridging with liquid swap quotes on mid-term maturities and stripping the appropriate curve. ...
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1 vote

The exact mechanics of USD OIS Swaps: SOFR, EFFR & Libor cessation

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 ...
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  • 2,076

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