There was an article on this recently in Risk and was discussing this very issue. There was an industry board convened. I'm not sure if they reached a conclusion.Hi,
I know this is a very old thread but I didn't want to create a new one. From july onwards the market standard settlement type for EUR swaptions shifts from cash IRR to collateralised cash price. With the latter I haven't had any experience yet. I was just wondering how the curves for the collateralised cash price settlement calculation are determined. I guess the curves itself are not fixed but only the quotes used to bootstrap them. Is that correct? Given that everybody uses a slightly different curve building technique this would imply that the swaption buyer and seller are usually in disagreement on the settlement amount. Is this what one typically sees in the USD market (where collateralised cash Price is already market standard)?
Thanks,
Bernd