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SARON: SARON Reference Rate: Methodology, Calculation and Publication

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SARON Reference Rate: Methodology, Calculation and Publication

This domain tests whether you understand SARON as a governed benchmark: what data it is built from, how the number is produced and published, and how the overnight fixings are turned into the compounded term rates used in contracts.

Definition and governance

  • SARON (Swiss Average Rate Overnight) is the CHF secured overnight reference rate, calculated from Swiss franc repo activity and administered by SIX Financial Information AG under a published, IOSCO-consistent methodology. The administrator is authorised by FINMA in its benchmark role.
  • Input data: CHF repo transactions on the SIX Repo platform against Swiss collateral, plus order-book quotes where transaction volume is insufficient. Because the rate is collateralised, it sits below unsecured money-market rates.
  • SARON is the recognised successor to CHF LIBOR, recommended by the National Working Group on CHF Reference Rates; legacy LIBOR contracts were transitioned with fallback spreads.

Calculation and publication

  • The rate is a volume-weighted median of eligible transactions inside the calculation window, with trimming of outliers and rounding to three decimals.
  • It is produced on each SIX trading day as an intraday value (around 12:00) and as the end-of-day value that contracts reference.
  • There is no fixing on weekends or exchange holidays; when compounding, the last published rate is carried over those calendar days.
  • Term rates are backward-looking: compounded SARON = [product of (1 + r_i x d_i/360) - 1] x 360/D, act/360.

Worked example

Seven calendar days, Monday to Monday. Fixings: Mon 0.40%, Tue 0.40%, Wed 0.42%, Thu 0.42%, Fri 0.41%. Friday covers three days (Fri, Sat, Sun). Factor = (1+0.0040/360)(1+0.0040/360)(1+0.0042/360)(1+0.0042/360)(1+0.0041x3/360) = 1.00001111 x 1.00001111 x 1.00001167 x 1.00001167 x 1.00003417 = 1.00007972. Annualised: 1.00007972 - 1 = 0.00007972; x 360/7 = 0.00410, i.e. 0.410%. A simple average of the fixings would give about 0.410% here only by coincidence; the compounding term structure and the three-day carry are what the exam wants shown.

Traps

  • Compounding with act/365 or averaging rates instead of compounding the daily factors.
  • Treating Friday's fixing as a one-day period and dropping the weekend.
  • Using the 12:00 intraday value for settlement instead of the end-of-day rate.
  • Assuming SARON is an unsecured or forward-looking term rate fixed at period start.