Rate Cutoff


Key Rate Cutoff in
OI Term Rate refers to the number N of business days, which when subtracted from the end Tₙ of the referenced period [T₀,Tₙ] over which the realized overnight index is observed, leads to a date Tₑ such that the overnight index value Iₑ set on that date is deemed to apply to all subsequent daily intervals until Tₙ for the purpose of calculating the average index over the period [T₀,Tₙ] as explained in OI Term Rate
Note the value Iₑ is generally published with some delay at some later date after Tₑ
It follows that the last N of the effective overnight index fixings in the observation period [T₀,Tₙ] are identical and all equal Iₑ

In the vanilla case where the effective overnight index value always equals the corresponding realized value, the number N equals 1.
Note N cannot exceed the number n of all overnight fixings occurring in the period [T₀,Tₙ]