What is an 'Overnight Index Swap'
An overnight index swap is an interest rate swap involving the overnight rate being exchanged for a fixed interest rate. An overnight index swap uses an overnight rate index, such as the Federal Funds Rate, as the underlying for its floating leg, while the fixed leg would be set at an assumed rate. Overnight index swaps are popular amongst financial institutions for the reason that the overnight index is considered to be a good indicator of the interbank credit markets, and less risky than other traditional interest rate spreads.
BREAKING DOWN 'Overnight Index Swap'
Generally shortterm, the interest of the overnight rate portion of the swap is compounded and paid at reset dates, with the fixed leg being accounted for in the swap's value to each party. The floating leg's present value is determined by either compounding of the overnight rate or by taking the geometric average of the rate over a given period. Like other interest rate swaps, an interest rate curve must be produced to determine the present value of any cash flows.

Delayed Rate Setting Swap
An exchange of cash flows, one of which is based on a fixed interest ... 
Swap Rate
The rate of the fixed portion of a swap as determined by its ... 
Bond Market Association (BMA) Swap
A type of swap arrangement in which two parties agree to exchange ... 
Asset Swap
Similar in structure to a plain vanilla swap, the key difference ... 
Swap
A derivative contract through which two parties exchange financial ... 
Liability Swap
An exchange of debt related interest rates between two parties ...

Investing Basics
How Are Interest Rate Swaps Valued?
When trading in financial markets, higher returns are generally associated with higher risk. Hedge your risk with interest rate swaps. 
Trading Strategies
Interest Rate Swaps Explained
Plain interest rate swaps that enable the parties involved to exchange fixed and floating cash flows. 
Investing
What's an Interest Rate Swap?
An interest rate swap is an exchange of future interest receipts. Essentially, one stream of future interest payments is exchanged for another, based on a specified principal amount. 
Investing
How To Read Interest Rate Swap Quotes
Puzzled by interest rate swap quotes terminology? Investopedia explains how to read the interest rate swap quotes 
Professionals
Interest Rate and Equity Swaps
CFA Level 1  Interest Rate and Equity Swaps. Learn the components of plain vanilla interest rate swaps and equity swaps. Contains sample calculations finding the payments for each swap. 
Investing Basics
Different Types of Swaps
Investopedia explores the most common types of swap contracts. 
Professionals
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CFA Level 1  Swaps. Learn how swaps can change the characteristics of assets or liabilities. Discusses the cash flows of interest rate and currency swaps. 
Professionals
Currency Swaps
CFA Level 1  Currency Swaps. Discusses the features of a currency swap. Learn how comparative advantage affects the payments made during a swap agreement. 
Investing
What Warren Buffet Calls "Weapons of Mass Destruction": Understanding the Swap Industry
A full analysis of how the swap industry works. 
Professionals
Swap Markets and Contracts
CFA Level 1  Swap Markets and Contracts. Learn the basics of swaps, including how they are used and settled. Includes various methods for terminating a swap contract.

What are interest rate swaps on the OTC market?
Learn about interest rate swaps and how they are traded over the counter, and understand the impact of DoddFrank on swaps ... Read Answer >> 
What is an absolute rate?
An absolute rate is easy to understand once you know the basics of an interest rate swap. An absolute rate is the fixed rate ... Read Answer >> 
What would motivate an entity to enter into a swap agreement?
Learn why parties enter into swap agreements to hedge their risks, and understand how the different legs of a swap agreement ... Read Answer >> 
What are the risks involved with swaps?
Learn about interest rate risk and counterparty risk for interest rate swap agreements, and understand how the DoddFrank ... Read Answer >> 
Do interest rate swaps trade on the open market?
Learn how interest rate swaps are traded on the OTC and interbank markets, and how these swaps can be used to arbitrage different ... Read Answer >> 
Can individual investors profit from interest rate swaps?
Find out how individual investors can speculate on interest rate movements through interest rate swaps by trading fixed rate ... Read Answer >>