Overnight Futures: Convexity Adjustment

12 Pages Posted: 9 Mar 2018

See all articles by Marc P. A. Henrard

Marc P. A. Henrard

muRisQ Advisory; OpenGamma; University College London - Department of Mathematics

Date Written: February 2018


In this note we describe the pricing, including the convexity adjustment, of the a new overnight benchmark based futures in the collateral framework using a Gaussian HJM-like model. The note also describes in details the cash-flows of the instrument. The adjustment obtained is relatively similar to the one obtained for LIBOR futures when the stochastic nature of the LIBOR/OIS spread is ignored. Some extra small adjustment need to be added to take into account that the futures settles only at the end of the accrual period while the LIBOR futures settle on fixing at the start of the underlying deposit period.

Keywords: overnight, futures, collateral, convexity adjustment

JEL Classification: G13, E43

Suggested Citation

Henrard, Marc P. A., Overnight Futures: Convexity Adjustment (February 2018). Available at SSRN: https://ssrn.com/abstract=3134346 or http://dx.doi.org/10.2139/ssrn.3134346

Marc P. A. Henrard (Contact Author)

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