Overnight Index Swap (OIS)
Definition
An overnight index swap (OIS) is an interest rate swap where the floating leg is re-fixed each day (rather than re-fixed each 3 months or each 6 months, for example, as might be more usual with a fixed/floating interest rate swap) against a published fixing for the overnight (O/N) interest rate that day – an ‘overnight index’.
How is it used?
An OIS is used in the same kind of way as any other interest rate swap, either to manage the interest rate risk on assets and liabilities, or to take speculative positions. However, the very short-term nature of the floating interest rate leg – i.e. only one day at a time – gives the OIS particular advantages and uses:
- Liquidity requirements and interest rate risk ...
Get Key Financial Market Concepts, 2nd Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
