Questions tagged [collateral]
Questions related to collateral, from impact on theoretical valuations to operational aspects of collateral posting.
47
questions
0
votes
1
answer
68
views
Why is ColVA a negative XVA adjustment?
The expression for ColVA is usually written as something similar to this:
$ColVA= -\int_{t}^{T} D(t,u) E_{t}\Big[ s_{X}(u)X(u)\Big]du$
Where D is the discount, $s_{x}$ the spread at which the ...
- 61
1
vote
0
answers
54
views
Cheapest-to-Deliver (CTD) collateral methodology
Do you know where can I find details about this methodology? Theoretically, in cases where the CSA allows collateral to be posted in different currencies, the counterparty will always choose the ...
- 61
0
votes
0
answers
192
views
Collateral rate vs. funding rate vs. repo rate in derivatives pricing post-GFC
I am reading Funding Beyond Discounting: Collateral Agreements and Derivatives Pricing by V. Piterbarg.
Now I have a question about the relation of the different funding rates in the paper.
$r_C$ is ...
- 101
0
votes
1
answer
120
views
future cashflow loan equivalence
I'm trying to improve my understanding of valuation under collateralisation.
One point that is made within multiple sources is for an uncollateralised derivative, how a future cashflow is equivalent ...
- 125
0
votes
1
answer
129
views
posting US treasury as collateral
lets say party A and party B are the two parties in a derivative contract.
If party B posts USD cash as collateral, it would expect party A to return the collateral with interest at settlement. How ...
- 734
2
votes
0
answers
177
views
How to apply a funded equity collar to illiquid stocks?
I investigate a specific case of the funded equity collar [1].
Let's assume that counterparty $A$ already has a stake in share $XYZ$ and wants to get funding out of it from a bank $B$, which does not ...
- 21
2
votes
0
answers
24
views
Tax obligation in collaterised loan
Typically physical assets e.g. gold are held as collateral for corporate loan. In case of default, the holder of the corporate loan (i.e. bank) can liquidate the collateral asset held to recover the ...
- 838
2
votes
1
answer
89
views
Synthetix' assets failure scenarios
Synthetix project provides the system where different assets like USD, BTC, stocks are emulated by minting tokens representing them (sUSD, sBTC) collateralised by SNX token. Prices are defined via ...
- 121
0
votes
1
answer
79
views
Price Adjustment Interest (PAI) for collateral Bond
I understand that, if cash is put as collateral, the party holding the collateral needs to pay the counter party the funding cost of the cash collateral (PAI).
How about if bonds are put as collateral?...
- 734
1
vote
3
answers
332
views
What is the definition of "cheapest collateral"?
Optimizing collateral is a hot topic in the financial industry. I came across the term cheapest collateral. What does it actually mean in the context of collateral optimization, please ?
- 734
0
votes
1
answer
284
views
Why do we theoretically have to take cross currency basis volatility into account when constructing Cheapest To Deliver (CTD) discount curves?
Let's take a collateralized USD IRS where there is optionality in collateral currency. My understanding is that it is standard practice to compute forward XXX/USD OIS basis curves for all currencies ...
1
vote
1
answer
195
views
Collateral on Derivative Position
Let say a bank enters an Interest rate swap with a counter-party, and this trade is collateralised.
I have heard about a specific term in such collateral agreement, wherein it states that the interest ...
- 838
0
votes
1
answer
362
views
Cheapest-to-deliver (CTD) discount curve II
This is a follow up question on this thread
I have come across the following relationship in a CTD curve bootstrapping routine:
$$\frac{DF_{XXX}^{CSA.EUR}}{DF_{EUR}^{CSA.EUR}} = \frac{DF_{XXX}^{CSA....
- 63
4
votes
2
answers
472
views
Uncollateralised trades in Libor transition
Consider an OTC derivative traded with no CSA agreement, i.e. the trade is uncollateralised. My understanding is that a Libor swap curve is used in this case to discount the cashflows for this ...
- 585
2
votes
0
answers
351
views
Switching from EONIA to ESTR for CSA discounting
In practice, when bilateral counterparties switch from OIS to ESTR discounting, the party which sees a fall in the fair value of the CSA contract gets compensated for the decrease by the other party (...
- 21