Collateral Choice Option Valuation

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

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

Standard Chartered Bank, London ( email )

London
United Kingdom

Vladimir Piterbarg (Contact Author)

Independent ( email )

No Address Available

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