Questions tagged [collateral]
Questions related to collateral, from impact on theoretical valuations to operational aspects of collateral posting.
47
questions
0
votes
0
answers
71
views
Collateral Management - Initial Margin Frequency
My understanding is that initial margin presents over collateralization and comes into play in an actual default scenario as it aims to cover closeout costs.
I was wondering what is the frequency of ...
2
votes
1
answer
191
views
Operational aspects of repo funding trades
It is widely known that repurchase agreements ("repos") are regularly used by market participants as a mean to fund long/short positions in a certain asset, in particular for derivative ...
- 8,149
7
votes
0
answers
213
views
Has a closed-form formula for the collateral choice option been found?
The collateral choice option problem has been formulated in e.g. Fujii and Takahashi (2011), Piterbarg (2012) or Antonov and Piterbarg (2013), as the computation of an expectation of the following ...
- 8,149
0
votes
1
answer
273
views
Optimising PnL on an interest rate swap
I recently just got asked the below question. Please help.
"You are about to execute a zero fixed rate vs. Float rate swap under daily cash margining with a client in a normal swap rate curve ...
- 71
2
votes
2
answers
291
views
How does the Collateral in Collateralized Loan Obligations (CLOs) Work?
I am trying to understand, in its simplest form, how the collateralized loan obligations (CLO) work.
I refer to an article in The Atlantic for those who are interested in learning about CLOs.
The way ...
- 323
1
vote
1
answer
863
views
Understanding CSA and novation
I had an example at work which I didn't have full intuition of. The example is as follows:
You have novated a forward starting cross-currency basis swap (let's say 10y10y EUR ccbs).
The PV is ...
- 11
0
votes
0
answers
59
views
Equity finance and primary brokerage and their products
I was in the project working on the asset classes known as EF/PB, which is short for Equity Fiance / Primary brokerage, I understand that Equity finance is more or less about securities lending, and ...
- 143
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
0
votes
0
answers
45
views
Possible to have different collateral for each party?
Normally bilateral credit support annexes would have both parties post/receive the same collateral be it US treasuries or cash etc. Are there CSAs
Where each party has a different set of eligible ...
2
votes
0
answers
63
views
Pricing bond backed by collateral
I'm new to quantitative finance, and trying to derive an interest rate for a collateralized bond.
Imagine there are two parties, Alice and Bob. Alice wants to lend $X$ units of an asset to Bob. The ...
- 121
1
vote
0
answers
67
views
What is a quick way to estimate the haircut on a collateral that is actively traded
If I have an traded asset like a bond with face value of 1 million, but currently trading at 0.9 million, can I simply say that the haircut, if I use this asset as a collateral for repo, is 1 - 0.9=0....
- 1,404
1
vote
0
answers
32
views
Quantitative impact of Dodd-Frank Act on risk management
The US Dodd-Frank Act (DFA) introduced mandatory central clearing of standard (e.g. plain vanilla) swaps for big financial institutions in the US in 2013.
It might be a broad question but: what have ...
- 161
2
votes
2
answers
2k
views
Collateralized / uncollateralized swap
Is a fully collateralized interest rate swap considered free of counterparty credit risk? Or close to risk free? Therefore discounted by the rate that best proxies the risk-free rate (which is the OIS-...
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
3
votes
3
answers
13k
views
Funded equity collars and margin loans
There is an article in the Financial Times today concerning equity funded collars [1]. The equity collar structure is used by a counterparty $A$ which wants to build up a position in a stock $S_t$. ...
- 8,149