<t>I have a question regarding the following model for the short rate in two currencies and the exchange rate, [$]x(t)[$],[$]\begin{align}dr_d(t) &= \left[ \nu_d(t) - \kappa_d r_d(t) \right] dt + \sigma_d(t) dW_d(t) \\dr_f(t) &= \left[ \nu_f(t) - \kappa_f r_f(t) \right] dt + \sigma_f(t) dW_f...

<t>Hi DeimanteR, thanks for your feedback.I spoke to Bloomberg and SuperDerivatives helpdesk on this issue. Bloomberg stated that most of the implied USD swaption volatility quotes submitted assumed OIS-based discounting but that some still assumed Libor-based discounting. For that reason, they intr...

<t>Hi,I have a few questions on USD swaption quotations that I was hoping somebody could answer. Are the implied ATM swaption volatilities quoted on the page VCAP21 on Reuters (and the associated spot premiums on page VCAP22) quoted assuming OIS discounting? In general, are USD swaption volatilities...

<t>Thanks Joet for the helpful reference - I hadn't read this before.What I was trying to hedge in my note was the sale of [$]|x|[$] units of a domestic collateralised domestic zero coupon bond i.e. the instrument with price process [$]P_{d, d}(t,1W)[$] in the language of the paper. I realise now th...

<t>If we stick with the simple example of the commitment to make a EUR payment, collateralised in EUR (daily posting, full MtM amount in cash with no thresholds or minimum margin amounts), in one week from the spot date.In the past this trade was said (incorrectly) to be worth x / (1 + L d) on the s...

<t>Hi APlus,Thanks for your feedback. I have read the papers that you referenced and from those papers it is clear that you use the discount factor derived from OIS swaps to discount the payment due in one week. However, I was trying to derive a simple hedging strategy, using market instruments, tha...

<t>Hi,In order to justify (to myself) using OIS discounting, I am looking at the simple case of a commitment by A to make a payment of |x| Euro to party B in one week from the spot date. I assume that the trade is marked to market daily, fully collateralised in Euro cash and that collateral earns EO...

<t>Hi Peter,Thanks a lot, that explains your comment. I agree that I think r can take any value as long as you can use it for both lending and borrowing.Regarding your comment on Antonio's paper, it does appear counterintuitive that the funding spread does not enter the pricing equation (34) when \g...

<t>Hi Peter,Thanks for your feedback and other helpful posts on this topic.I am struggling to understand your first comment. Would it be possible to expand on it a little for the case of a USD swap fully collateralised in USD cash where the collateral account earns/incurs Fed Funds i.e. where c(s) i...

<t>Hi,For collateralised derivatives, how do I know the form of the CSA associated with the market quotes displayed by market data providers? For example, if I am looking at EUR/USD cross-currency basis swap quotes on Reuters screen EURCBS:Is there an assumed CSA agreement underlying these quotes an...

<t>Hi,I realize this is a relatively old post but I thought that I would contribute this in case it helps. Let . To move from line 2 to line 3 in equation 11, start with the numerator in the second line of equation (11) of the paper.whereThen defining the measure by gives the third line of equation ...

<t>Hi all,I struggled to understand this particular paragraph initially also so I thought that I would add a few comments to Peter's explanation in case they might help.h(t) is the value at time t of the final payoff h(T) at time T and any intermediate cashflows arising from the collateral account o...