OIS JPY TONA 3M

The TONA rate (Tokyo Overnight Average Rate) is the benchmark risk-free overnight rate for the Japanese Yen. It is calculated by the Bank of Japan and reflects the average cost of unsecured overnight interbank lending. An Overnight Index Swap on TONA (OIS TONA) is a derivative financial instrument whereby one party agrees to pay interest at a pre-determined fixed rate in exchange for receiving payments at a floating rate from the other party. In this case, the floating rate is calculated as the compounded average of the daily TONA rates over a given period. The parties typically exchange only the net difference between the two payment streams, without any exchange of the notional principal amount. These swaps are used to hedge against interest rate risk or to speculate on the future movement of interest rates.