[Quantlib-users] An index derived from overnight index such as SOFR or effective FF

[Arkadiy N. <ark...@gm...>]

Wanted to bring something up for the discussion for the community. Given undergoing libor replacement efforts, we’ll likely start seeing more overnight indexed swaps and floating rate notes that are behaving just like ois variable legs, i.e. resetting periodically to an index that’s either a simple or compound average of overnight index fixings. Would it make sense to add a new kind of index to represent these instruments? This paper from New York Fed https://www.newyorkfed.org/medialibrary/Microsites/arrc/files/2019/Users_Guide_to_SOFR.pdf describes different flavors in details.

As far as I understand, Quantlib already takes care of such cash flows (since it supports regular overnight indexed swap and arithmetic average overnight indexed swap). And of course, it’s possible to replicate these explicitly, but it would be very convenient to be able to get fixing for these out of the box, and have quantlib taking care of various conventions (averaging, fixing delays, advance/arrears, etc.) It could also simplify the definition of overnight indexed swap and would potentially allow merging regular ois and arithmetic average ois implementations (in that common implementation, a floating leg is defined using an index - compound average in one case and simple average in the other).

This seems to make sense from the functionality perspective, but I am not sure if the suggestion passes the mustard as far as Quantlib’s architecture is concerned?

I am happy to discuss this in more details if folks have questions.


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