{"id":14622,"date":"2025-10-27T10:49:01","date_gmt":"2025-10-27T05:19:01","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=14622"},"modified":"2025-10-30T15:52:42","modified_gmt":"2025-10-30T10:22:42","slug":"overnight-index-swap","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/overnight-index-swap\/","title":{"rendered":"Overnight Index Swap"},"content":{"rendered":"<h2><strong>About Overnight Index Swap:\u00a0<\/strong><\/h2>\n<ul>\n<li>It is a\u00a0<strong>derivative instrument<\/strong>\u00a0where returns under a\u00a0<strong>fixed rate asset are swapped<\/strong>\u00a0against a pre-determined published index of a\u00a0<strong>daily overnight reference<\/strong>\u00a0rate for an agreed period of time.<\/li>\n<li><strong>Purpose:<\/strong>\u00a0The primary purpose of an OIS is\u00a0<strong>to manage interest rate risk<\/strong>, particularly the risk associated with fluctuations in the overnight lending rate.<\/li>\n<li>An overnight index swap rate is\u00a0<strong>calculated each day.<\/strong><\/li>\n<li>This interest rate\u00a0is based on the average interest rate institutions with loans based on the overnight rate have paid for that day.<\/li>\n<\/ul>\n<p><strong>How does an OIS work?<\/strong><\/p>\n<ul>\n<li>These are instruments that allow\u00a0<strong>financial institutions\u00a0<\/strong>to swap the\u00a0<strong>interest rates<\/strong>\u00a0they are paying\u00a0<strong>without having to refinance<\/strong>\u00a0or change the terms of their existing loan.<\/li>\n<li>When two financial institutions create an overnight index swap,\u00a0<strong>one of the institutions is swapping an overnight<\/strong>\u00a0(floating) interest rate and the other institution is swapping a\u00a0<strong>fixed short-term interest rate.<\/strong><\/li>\n<li>To get the swap rolling, both the firms would agree to continue servicing their loans, but at the end of a specified time period whoever ends up paying less interest will make up the difference to the other firm.<\/li>\n<\/ul>\n<hr \/>\n<h3>Q1: What are Derivatives?<\/h3>\n<p>Derivatives\u00a0refers to a type of financial contract whose value is dependent on an underlying asset, group of assets, or benchmark. These contracts can be used to trade any number of assets and carry their own risks.<\/p>\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.business-standard.com\/economy\/news\/rbi-to-review-fpi-investment-limit-in-overnight-index-swap-market-patra-124080801435_1.html\" target=\"_blank\" rel=\"nofollow noopener\">Monetary policy review: FPI investment limit in OIS market under review<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Overnight Index Swap is a derivative instrument where returns under a fixed rate asset are swapped against a pre-determined published index of a daily overnight reference rate for an agreed period of time.<\/p>\n","protected":false},"author":5,"featured_media":14623,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-14622","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-prelims-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/14622","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=14622"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/14622\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/14623"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=14622"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=14622"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=14622"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}