Clean Valuation Framework for the USD Silo - An Implication for the Forthcoming Standard Credit Support Annex (SCSA)

15 Pages Posted: 10 Dec 2011

See all articles by Masaaki Fujii

Masaaki Fujii

University of Tokyo - Faculty of Economics

Akihiko Takahashi

University of Tokyo - Faculty of Economics

Date Written: December 8, 2011

Abstract

In the forthcoming ISDA Standard Credit Support Annex (SCSA), the trades denominated in non-G5 currencies as well as those include multiple currencies are expected to be allocated to the USD silo, where the contracts are collateralized by USD cash, or a different currency with an appropriate interest rate overlay to achieve the same economic effects. In this paper, we have presented a simple generic valuation framework for the clean price under the USD silo with the the detailed procedures for the initial term structure construction. We have also shown that Cross Currency Swap (CCS) basis spread can be expressed as a difference between two swap rates.

Keywords: CSA, SCSA, OIS, Collateralization, basis spreads, HJM

Suggested Citation

Fujii, Masaaki and Takahashi, Akihiko, Clean Valuation Framework for the USD Silo - An Implication for the Forthcoming Standard Credit Support Annex (SCSA) (December 8, 2011). Available at SSRN: https://ssrn.com/abstract=1969686 or http://dx.doi.org/10.2139/ssrn.1969686

Masaaki Fujii (Contact Author)

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

Akihiko Takahashi

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

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