What are swap conventions?
2.2. Interest Rate Swaps. An interest rate swap is an agreement between two counterparties under which each party agrees to make periodic payments to the other for an agreed period of time, based on a notional amount of principal, with interest paid in arrears and settled on a net cash basis.
How are basis swaps quoted?
Basis swaps are quoted as a spread over a reference index. For example, 3-month LIBOR is frequently used as a reference. Spreads are quoted over it.
How does an OIS swap work?
An overnight index swap uses an overnight rate index such as the federal funds rate as the underlying rate for the floating leg, while the fixed leg would be set at a rate agreed on by both parties.
What is a SOFR OIS swap?
Overnight Index Swap referencing SOFR. An OIS (Overnight Index Swap) is a swap consisting of two legs: a fixed leg that pays a fixed rate over regular intervals and a floating (or overnight) leg that pays a variable rate over the same intervals as the fixed leg.
What is an OIS curve?
The acronym OIS stands for Overnight Index Swap and represents a term interest rate swap against an overnight index. In the United States, the OIS curve represents – in its most simplistic sense – the Federal Funds curve.
What is a basis swap used for?
A basis rate swap (or basis swap) is a type of swap agreement in which two parties agree to swap variable interest rates based on different money market reference rates. The goal of a basis rate swap is for a company to limit the interest rate risk it faces as a result of having different lending and borrowing rates.
How do you read a swap spread?
It is the differential amount that should be added to the yield of a risk-free Treasury instrument that has a similar tenure. For example, assume 10-year T-Bill offers a 4.6% yield. The last quote of a 10-year interest rate swap having a swap spread of 0.2% will actually mean 4.6% + 0.2% = 4.8%.
What is the difference between a swap and an OIS?
This is not an “OIS” in the classical sense, where you would usually have (a) a fixed rate on the other leg rather than a 3M Libor, and (b) compound the 1d rate fixings rather than use arithmetic average. Show activity on this post. I think a little clarity is needed here. A swap means exchanging A for B. Swaps trade on anything and everything.
What are OIS (overnight index swaps)?
[VIDEO] Understanding Overnight Index Swaps (OIS) Overnight Index Swaps (OIS) Overnight Index Swaps (OIS) are instruments that allow financial institutions to swap the interest rates they are paying without having to refinance or change the terms of the loans they have taken from other financial institutions.
What about OIS swaps in sdrview?
OIS swaps tend to be relatively short dated; in USD many are traded off SEF, and one can see in SDRView that the volumes are much smaller than regular LIBOR fixed float swaps. The on-SEF volumes can be further broken out by SEF in SEFView. Updated 13th July 2016: Added payment lag of 2D for AUD. Updated 6th July 2017: Added NZD-NZIONA-OIS-COMPOUND.
Are OIS conventions relevant to the development of RFR-based term rates?
This briefing considers how conventions used in Overnight Index Swaps (OIS) and RFR futures markets are relevant to the development of RFR-based term rates. Addressing differences between IBORs and RFRs There are various practical and economic differences between the -IBORs and the RFRs that have been identified to replace them.