Multi-Curve Framework with Collateral

OpenGamma Quantitative Research, n.13, July 2013

44 Pages Posted: 28 Jul 2013 Last revised: 1 Dec 2013

See all articles by Marc P. A. Henrard

Marc P. A. Henrard

muRisQ Advisory; OpenGamma; University College London - Department of Mathematics

Date Written: July 21, 2013

Abstract

This note is dedicated to the impact of collateral on the multi-curve framework. The pricing formulas in presence of collateral are described in a generic way encompassing several financial realities. The collateral cases covered include cash collateral, foreign currency collateral, collateral by assets (collateral square) and collateral with haircut. The change of collateral is also described, including the convexity adjustment required. The pricing of STIR futures in this framework is analysed in detail.

Keywords: multi-curve framework, collateral, convexity adjustment, discounting, haircut, Libor derivatives

Suggested Citation

Henrard, Marc P. A., Multi-Curve Framework with Collateral (July 21, 2013). OpenGamma Quantitative Research, n.13, July 2013. Available at SSRN: https://ssrn.com/abstract=2302278 or http://dx.doi.org/10.2139/ssrn.2302278

Marc P. A. Henrard (Contact Author)

muRisQ Advisory ( email )

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OpenGamma ( email )

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University College London - Department of Mathematics ( email )

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