43:
1351:
138:, and OIS rates, based on overnight rates, for the same term. The spread between the two rates is considered to be a measure of health of the banking system. It is an important measure of risk and liquidity in the money market, considered by many, including former
238:
In the United States, the LIBOR–OIS spread generally maintains around 10 bps. This changed abruptly, as the spread jumped to a rate of around 50 bps in early August 2007 as the financial markets began to price in a higher risk environment. Within months, the
99:
over the floating coupon period. Note that the OIS term is not overnight; it is the underlying reference rate that is an overnight rate. The exact compounding formula depends on the type of such overnight rate.
95:) over some given term, e.g. 10Y, where the periodic fixed payments are tied to a given fixed rate while the periodic floating payments are tied to a floating rate calculated from a daily compounded
442:
215:
only swap the floating rate of interest for the fixed rate of interest. The spread between the two is, therefore, a measure of how likely borrowing banks will default. This reflects
173:. Since that time the spread has declined erratically but substantially, dropping below 100 basis points in mid-January 2009 and returning to 10–15 basis points by September 2009.
258:
countries threatened
European banks. The spread varied from 10 to 50 bps up through February 2018. As of March 2018, the spread again stands at 50+ bps level.
894:
469:
333:
Sengupta, Rajdeep and Yu Man Tam. (2008) The LIBOR–OIS Spread as a
Summary Indicator. Economic Synopses, Number 25, 2008. Federal Reserve Bank of St. Louis
181:
3-month LIBOR is generally a floating rate of financing, which fluctuates depending on how risky a lending bank feels about a borrowing bank. The OIS is a
1388:
189:. The OIS allows LIBOR-based banks to borrow at a fixed rate of interest over the same period. In the United States, the spread is based on the LIBOR
421:
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154:, while a lower spread indicates higher liquidity in the market. As such, the spread can be viewed as indication of banks' perception of the
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As markets improved, the spread fell and as of
October 2009, stood at 10 bps once again, only to rise again as struggles of the
123:
for sterling. The fixed rate of OIS is typically an interest rate considered less risky than the corresponding interbank rate (
1600:
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1507:
1381:
135:
103:
The index rate is typically the rate for overnight lending between banks, either non-secured or secured, for example the
52:
261:
Whilst liquidity is provided in excess by monetary policy authorities the LIBOR-OIS is less of an indicator of stress.
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807:
661:
455:
888:
1066:
230:. However, given the mismatch in the tenor of the funding, it also reflects worries about liquidity risk as well.
150:. A higher spread (high Libor) is typically interpreted as indication of a decreased willingness to lend by major
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60:. The reason given is: LIBOR was discontinued in 2021 and was underreported during the 2008 credit-crunch.
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31:
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822:
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169:, the spread spiked to an all-time high of 364 basis points in October 2008, indicating a severe
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of other financial institutions and the general availability of funds for lending purposes.
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Please help update this article to reflect recent events or newly available information.
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in the sense that the lending bank loans cash to the borrowing bank, and the OIS is
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from failure. The spread continued to maintain historically high levels as the
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derived from the overnight rate, which is generally fixed by the local
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422:"Why It Matters That the Libor-OIS Spread Is Widening: QuickTake"
56:
of parts of this article (those related to the LIBOR-OIS spread)
1567:
1542:
386:"Interest-Rate Derivatives Signal Banks Still Reluctant to Lend"
367:"Libor for Dollars Slides Most Since Dec. 17 on Cash Injections"
151:
108:
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451:
443:
Dollar Libor–OIS Spread at 2-Year High Amid Europe Bank
Concern
36:
146:, to be a strong indicator for the relative stress in the
161:
The LIBOR–OIS spread has historically hovered around 10
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1075:
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134:is the difference between IRS rates, based on the
365:Brown, Matthew; Finch, Gavin (January 12, 2009).
58:may be compromised due to out-of-date information
127:) because there is limited counterparty risk.
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463:
8:
30:For other uses of the abbreviation OIS, see
1389:
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1367:
500:
470:
456:
448:
328:
326:
324:
322:
384:Capo McCormick, Liz (January 24, 2008).
1295:Power reverse dual-currency note (PRDC)
1235:Constant proportion portfolio insurance
287:
27:Interest rate swaps for overnight loans
346:"Money Flows Back to Commercial Paper"
7:
1230:Collateralized debt obligation (CDO)
165:(bps). However, in the midst of the
25:
1349:
344:Zeng, Min (September 20, 2008).
41:
308:from the original on 2021-03-13
1057:Year-on-year inflation-indexed
1:
1067:Zero-coupon inflation-indexed
167:financial crisis of 2007–2010
1270:Foreign exchange derivative
662:Callable bull/bear contract
1627:
29:
1344:
1171:Stock market index future
485:
404:"3 MO LIBOR – OIS SPREAD"
296:"CSFB Zurich note on OIS"
1422:Interbank lending market
1290:Mortgage-backed security
1285:Interest rate derivative
1260:Equity-linked note (ELN)
1245:Credit-linked note (CLN)
1417:Effective interest rate
1240:Contract for difference
541:Risk-free interest rate
351:The Wall Street Journal
211:in the sense that both
1427:Overnight indexed swap
1022:Forward Rate Agreement
81:overnight indexed swap
1601:Derivatives (finance)
1250:Credit default option
594:Employee stock option
271:Multi-curve framework
251:continued to unfold.
243:was forced to rescue
1204:Inflation derivative
1189:Commodity derivative
1161:Single-stock futures
1151:Normal backwardation
1141:Interest rate future
982:Conditional variance
488:Derivative (finance)
32:OIS (disambiguation)
1356:Business portal
1209:Property derivative
410:. January 12, 2009.
1473:Federal funds rate
1214:Weather derivative
1199:Freight derivative
1181:Exotic derivatives
1101:Commodities future
788:Intermarket spread
551:Synthetic position
479:Derivatives market
140:US Federal Reserve
105:Federal funds rate
89:interest rate swap
1588:
1587:
1538:Singaporean SIBOR
1364:
1363:
1265:Equity derivative
1255:Credit derivative
1223:Other derivatives
1194:Energy derivative
1156:Perpetual futures
1037:Overnight indexed
987:Constant maturity
948:
947:
895:Finite difference
828:Protective option
234:Historical levels
195:Federal Reserve's
77:
76:
16:(Redirected from
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1126:Forwards pricing
900:Garman–Kohlhagen
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428:. March 9, 2018.
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156:creditworthiness
132:LIBOR–OIS spread
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53:factual accuracy
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18:LIBOR–OIS spread
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1606:Reference rates
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1493:Pakistani KIBOR
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1398:Reference rates
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1326:Great Recession
1321:Government debt
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1275:Fund derivative
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1136:Futures pricing
1111:Dividend future
1106:Currency future
1089:
1071:
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920:Put–call parity
856:
843:Vertical spread
778:Diagonal spread
748:Calendar spread
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241:Bank of England
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223:in contrast to
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111:for US dollar,
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701:Mountain range
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437:External links
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301:. 2021-03-13.
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226:liquidity risk
213:counterparties
198:Fed Funds rate
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177:Risk barometer
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144:Alan Greenspan
119:) for Euro or
97:overnight rate
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1311:Consumer debt
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1308:
1306:
1304:Market issues
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1280:Fund of funds
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1121:Forward price
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1032:Interest rate
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925:MC Simulation
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885:Black–Scholes
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838:Risk reversal
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614:Option styles
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531:Open interest
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511:Delta neutral
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426:Bloomberg.com
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371:Bloomberg.com
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193:rate and the
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1508:Indian MIBOR
1426:
1131:Forward rate
1042:Total return
1036:
930:Real options
833:Ratio spread
813:Naked option
773:Debit spread
604:Fixed income
546:Strike price
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310:. Retrieved
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187:central bank
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163:basis points
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57:
51:
1405:Terminology
1062:Zero Coupon
992:Correlation
940:Vanna–Volga
798:Iron condor
584:Bond option
219:credit risk
1595:Categories
1578:Mutan rate
1558:TED spread
1336:Tax policy
1052:Volatility
962:Amortising
803:Jelly roll
738:Box spread
733:Backspread
725:Strategies
561:Volatility
556:the Greeks
521:Expiration
312:2021-03-13
282:References
276:TED spread
191:Eurodollar
115:(formerly
68:March 2023
1412:Bank rate
1027:Inflation
977:Commodity
935:Trinomial
870:Bachelier
862:Valuation
743:Butterfly
677:Commodore
526:Moneyness
203:LIBOR is
142:chairman
1166:Slippage
1096:Contango
1080:Forwards
1047:Variance
1007:Dividend
1002:Currency
915:Margrabe
910:Lattices
889:equation
875:Binomial
823:Strangle
818:Straddle
715:Swaption
697:Lookback
682:Compound
624:Warrants
599:European
579:American
571:Vanillas
536:Pin risk
516:Exercise
303:Archived
265:See also
228:premiums
221:premiums
87:) is an
1518:RIGIBOR
1478:Helibor
1468:EURONIA
1453:Euribor
1085:Futures
705:Rainbow
672:Cliquet
667:Chooser
647:Barrier
634:Exotics
496:Options
1553:STIBOR
1533:Shibor
1523:SAIBOR
1146:Margin
1012:Equity
905:Heston
808:Ladder
758:Condor
753:Collar
710:Spread
657:Binary
652:Basket
249:crisis
209:stable
1573:TONAR
1563:TIBOR
1548:SONIA
1528:SARON
1503:Libor
1488:JIBAR
1483:HIBOR
1458:EONIA
1448:EIBOR
1441:Rates
1017:Forex
972:Basis
967:Asset
954:Swaps
880:Black
783:Fence
642:Asian
504:Terms
306:(PDF)
299:(PDF)
256:PIIGS
205:risky
152:banks
136:LIBOR
125:LIBOR
121:SONIA
117:EONIA
1568:TIIE
1543:SOFR
1463:€STR
851:Bull
847:Bear
589:Call
183:swap
130:The
113:€STR
109:SOFR
50:The
619:Put
107:or
93:IRS
85:OIS
79:An
1597::
849:,
609:FX
424:.
406:.
388:.
369:.
348:.
321:^
200:.
1390:e
1383:t
1376:v
891:)
887:(
853:)
845:(
471:e
464:t
457:v
392:.
373:.
354:.
315:.
91:(
83:(
70:)
66:(
34:.
20:)
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