A fixed-to-floating interest rate swap where the floating leg is determined by reference to an interbank overnight cash rate and is exchanged for some fixed interest rate. The term of an overnight index swap (OIS) ranges typically between one week and two years. In other words, this interest rate swap entails the exchange of a fixed interest rate against a predetermined published index of a daily reference rate for a specific period of time.

More specifically, the periodic floating rate of the swap is calculated as the geometric average of an overnight index, i.e., the average of overnight rates during the payment period. For example, an overnight index swap may involve the exchange of OIS rate against a fixed rate of 5.5%. The OIS rate is usually calculated by reference to the overnight rate (repo rate) over the swap tenor.