All Questions
Tagged with collateral discounting
7
questions
0
votes
1
answer
130
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
0
votes
1
answer
293
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 ...
0
votes
1
answer
373
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
2
votes
2
answers
3k
views
What is the difference between a cleared interest rate swap and a OTC interest rate swap with collateral in theory
I understand the aspect that central clearing reduced counterparty risks. From the valuation side, am I right that cash flows for both trades will be discounted at the OIS rate?
The party that holds ...
- 734
7
votes
1
answer
6k
views
Cheapest-to-deliver (CTD) discount curve
Can someone explain, in layman's terms, the mechanics (the algorithm steps) of the construction of the discount curve in the case when the CSA allows the posting party to choose a currency (from a ...
- 250
0
votes
2
answers
625
views
What Is the correct discounting, risky or riskless?
Suppose I can sell a European put in two ways: 1) in a mark to market collateralized market with collateral rate equal to the riskless rate $r$; 2) in a noncollaterized market where I get the payment ...
- 2,806
5
votes
1
answer
904
views
Risk-neutral expectation equation with collateral and funding costs
I am looking at a paper by V. Piterbarg, Funding beyond discounting: collateral agreements and derivatives pricing, that you can download on the following link, in which the author adapts the Black-...
- 8,149