Building a Meeting-Date Rate Curve from OIS and Futures

Summary

The document outlines a proposed approach to building a central bank meeting-date curve from overnight indexed swap quotes. It starts with overnight and monthly OIS rates, adjusts them using the spread between the policy target and the effective overnight rate, and converts short OIS swap rates into forward rates that can be bootstrapped. The resulting points can then be interpolated between dates.

To represent policy changes at meetings, the answer suggests identifying sufficiently large jumps between adjacent OIS points and applying a rate increase after the relevant meeting date. This is a sketch rather than a complete QuantLib implementation, and it does not show how to construct the curve in the library or incorporate futures prices in detail. Its jump-detection rule assumes discrete, standard-sized hikes and can miss smaller moves or irregular policy changes; the treatment of meeting timing and interpolation also needs careful specification.

Key ideas

• The proposed curve uses overnight and monthly OIS rates as input points.
• A target-to-effective-rate spread can be applied to align OIS rates with the policy rate convention.
• Short OIS swap quotes can be converted into forward rates and bootstrapped.
• Interpolation fills the intervals between observed curve points.
• Large rate differences across adjacent points may indicate a meeting-related step, subject to simplifying assumptions.

Tags

# Central Bank Meeting Date Curve in QuantLib


# Central Bank Meeting Date Curve in QuantLib












Is it possible to construct a central bank meeting date curve, using futures prices & OIS rates, in QuantLib? Specifically, I mean a yield curve with flat (constant) forward rates in between meeting dates, and discontinuous moves on meeting dates (or 1 day after I guess, given that typically the rate change applies the next day). If so, how?

## Answer by Nicholasislearningthings (score 0)

https://quant.stackexchange.com/a/71101

From my first line of thought:

- Obtain OIS 1D,1M,2M,...12M

- Use the Fed Funds Target - EFFR spread and apply that spread to each OIS curve.

- Convert the simple 1,2, 3M OIS swaps to 1M, 1M1M, 2M2M forward rate curves. This is a simple process is easily bootstrapped.

- Interpolate (Linear, spline etc.) between each data point. In your example- you request the jumps to be after specific "meeting dates". You could iterate through each data point, and if OIS_next - OIS_t > 25bps. You could simply apply a function that increases it after the meeting date (Which is between dates next and t) based on this condition (Assuming no "micro" hikes or ECB style hikes)

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.