News
Energy & Commodities
End of day European Light End – Product enhancement
By Francesca Marrone
29 Nov 2024
Energy Market Overview: Oil Price Decline and Renewed Focus on Fossil Fuels
22 Nov 2024
FX & Money Markets
Post-Election Market Rally: USD Appreciation and Central Bank Rate Cuts
By Sal Provenzano
18 Nov 2024
Interest Rate Derivatives
Interest Rate Derivatives Updates: November 2024
By Jessica Kalaria
13 Nov 2024
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Our Overnight Index Swaps (OIS) data packages offer price transparency for the global OIS markets. Coverage includes spot and forward start OIS, OIS spreads, IMM dates and central bank meeting dates for both deliverable and non-deliverable currencies.
Manage Interest Rate Risk: OIS can be used by financial institutions such as banks, pension funds, and insurance companies to manage interest rate risk on their fixed-rate assets and liabilities. For example, a bank with a large portfolio of fixed-rate mortgages may use OIS to hedge against a rise in interest rates.
Speculation: OIS can be used by hedge funds and other financial institutions to speculate on interest rate movements.
Funding and Liquidity Management: OIS can be used by financial institutions to manage their funding and liquidity needs. For example, a bank may use OIS to raise funds at a lower cost than traditional borrowing methods.
Basis Trading: Some traders use OIS as a hedge against basis risk, which is the risk that arises from the difference between the cash and derivative market. By using OIS, traders can lock in a specific interest rate spread between the cash and derivative market.
An OIS is a type of interest rate swap in which two parties agree to exchange a series of interest rate payments based on a specified notional amount. One party pays a fixed rate of interest and the other pays a compounded or averaged interest rate based on a specified overnight index which is typically derived from specific overnight lending activity, such as the Federal Funds rate in the US.
In many currencies, OIS’ are commonly used as a benchmark for short-term interest rates, an alternative to existing or deprecated term IBOR fixings. OIS are generally considered to be more robust than other short-term IBOR benchmarks because they are typically based on more liquid lending activity. As OIS are based on overnight lending, and in some cases collateralised overnight lending (e.g. SOFR in US dollars), OIS rates can be considered to represent a very low level of credit risk, lower than term IBOR rates. In this respect, OIS rates can serve as a base level over which credit risk can be expressed as a credit spread.
In some currencies OIS swaps, based on ARRs (alternative reference rates) have replaced IBOR swaps completely, for example GBP (SONIA), JPY (TONA) and USD (SOFR) in June 2023.
