Hedging the OIS discounting impact

ANORAK · October 18th, 2011, 1:53 pm

Is there a hedge for the changes over time on the PV change between OIS & libor discounting?If I have a vanilla swap that I value using Libor discounting and then OIS discounting, I will generate a pv difference. The value of this will change during the life of the deal according to the size of the Libor-OIS spread and with changes to the underlying Libor rates. Is there a hedge for the changes in the difference due to the different discounting methods?Thanks.

GoldDigga · October 18th, 2011, 2:38 pm

Discounting with OIS means that bumping the OIS curve has an impact on your swaps PV (especially off-market). You can calculate OIS deltas for each bucket of your book and hedge as you wish. An interesting question to think about is "if you're receiving 10Y USD swap on 100mio, are you long or short 10Y OIS?" "What is the notional of your hedge?"

miscelania · October 19th, 2011, 10:37 am

Hello,I would also be interested in Hedgint the OIS curve impact and also the different forward curves impact.I wanna learn from scratch how could I perform these hedges. Would you recommend me please some references that could help me?Thank you,