Collateral Choice Option Valuation

20 Pages Posted: 8 Oct 2013 Last revised: 29 Oct 2014

See all articles by Alexandre Antonov

Alexandre Antonov

Danske Bank - Danske Markets

Vladimir Piterbarg

NatWest Markets; Imperial College London

Date Written: August 13, 2013

Abstract

Credit Support Annexes (CSAs) that allow multiple currencies as collateral give rise to a collateral choice option in discounting. Numerical efficiency for valuing this optionality is key and first-order approximations have been proposed previously. In this paper, for the case of two currencies, we propose more accurate schemes that are still very efficient.

Keywords: CSA, collateral, collateral choice option, discounting, Credit Support Annex, OTC

JEL Classification: C61, G13, G21

Suggested Citation

Antonov, Alexandre and Piterbarg, Vladimir, Collateral Choice Option Valuation (August 13, 2013). Available at SSRN: https://ssrn.com/abstract=2337068 or http://dx.doi.org/10.2139/ssrn.2337068

Alexandre Antonov

Danske Bank - Danske Markets ( email )

Holmens Kanal 2-12
DK-1092 Copenhagen K
Denmark

Vladimir Piterbarg (Contact Author)

NatWest Markets ( email )

250 Bishopsgate
London, EC2M 4AA
United Kingdom

Imperial College London ( email )

South Kensington Campus
Imperial College
LONDON, SW7 2AZ
United Kingdom

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