Overnight rate?

CFA General
#1

Daily or Annual? Stupid question… i.e. overnight rate is 0.50%

#2

Annual. 0.5% per day is mega money. If banks could lend at that rate, why would they do anything else?

#3

thanks!

#4

Yeah. Actual rate you pay is 0.5%/360 for one night’s interest (assuming that is the rate of course).

#5

Thanks, captain obvious.

#6

On a related topic… if you have a 1yr IR basis swap that receives 3mL and pays OIS (or FF or some overnight rate)… how are the amounts of payments determined for the overnight leg? Let’s say that the 3m Libor resets on March 31 and every 3 months afterwards - is OIS reset every day with payments made every day for the OIS leg?