Risk glossary

 

OIS discounting

OIS discounting is the standard methodology for valuing cash-collateralised derivatives contracts using overnight index swap rates – the rate that would be paid by the collateral receiver to the poster.  

Previously, Libor was used to discount all derivatives. This changed after the spread between Libor and other overnight rates blew out dramatically during the 2008 financial crisis. As a result, most of the major dealers switched to OIS discounting, with the applicable rate determined by the currency of the collateral being posted. For instance, a swap collateralised with US dollars is discounted using the federal funds rate, while a trade with euro collateral is discounted using the Euro Overnight Index Average (Eonia).

Major swaps clearing houses have also moved to OIS discounting.

Click here for articles on OIS discounting. 

  • LinkedIn  
  • Save this article
  • Print this page  

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here