Collateral Choice Option Valuation
20 Pages Posted: 8 Oct 2013 Last revised: 29 Oct 2014
Date Written: August 13, 2013
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: Suggested Citation