# The secret history of the OIS discounting bonanza

## The Wild West

The fact that swaps traders at Goldman Sachs and a handful of other dealers made a lot of money in 2008 and 2009 as a result of the industry’s switch to collateral-based valuation is an open secret. Exactly how they did it, and how much they made, has never previously been revealed.

Thanks to a host of interviews with current and former traders on the buy- and sell-side, this month’s cover story sheds some light on what was arguably the most dramatic change in the history of the over-the-counter derivatives market, during a time when the financial system itself was coming apart at the seams.

“It had a Wild West-type feel, and it was breaking new ground,” one swaps trader says. “With hindsight, they were fantastic times. I learned more in those two years than in the previous 10 years of my career.”

What everyone learned was that trades should be discounted at the rate paid on the accompanying collateral – the overnight indexed swap (OIS) rate for cash-collateralised trades – and that swaps portfolios across the Street were valued incorrectly. What made it interesting was that everyone learned this at different times, with Goldman Sachs a couple of years or more ahead of the pack.

#### 7 days in 60 seconds

###### VM change, Libor fallback and DTCC blockchain

The week on Risk.net, November 10-16, 2017