# Overnight Index Swap (OIS)

*Derivatives & Options — Finicade finance glossary*

An OIS swaps a fixed rate against the compounded overnight rate, so its fixed leg is a clean market forecast of average central bank policy over the term. Because overnight lending carries minimal credit risk, OIS became the standard discounting curve for collateralised derivatives after 2008. The old LIBOR-OIS spread was the market's favourite thermometer for bank funding stress.

**Also known as:** OIS, overnight index swap rate

**Related terms:** [SOFR](https://finicade.com/glossary/sofr), [Interest Rate Swap](https://finicade.com/glossary/interest-rate-swap), [Discount Factor](https://finicade.com/glossary/discount-factor), [Monetary Policy](https://finicade.com/glossary/monetary-policy), [LIBOR](https://finicade.com/glossary/libor)

**Taught in:** Quant Quest — Interest Rate Instruments II

Source: https://finicade.com/glossary/overnight-index-swap