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by PvalAnal85
February 5th, 2013, 2:25 pm
Forum: General Forum
Topic: Collateral/CSA conventions for interest rate swaps
Replies: 5
Views: 10557

Collateral/CSA conventions for interest rate swaps

<t>QuoteThe problem with say a 5year swap is that the next day you cannot observe a liquid price for a (5y-1d) swap. So the two parties have to agree on a fair price. But if the price depends on firm specific properties (in this case the funding spread) this is not straightforward. As I see it they ...
by PvalAnal85
February 5th, 2013, 2:18 pm
Forum: General Forum
Topic: Shorting competition before product launch
Replies: 8
Views: 9312

Shorting competition before product launch

If you have to ask the question, then you probably shouldn't be doing it!
by PvalAnal85
January 23rd, 2013, 4:17 pm
Forum: General Forum
Topic: Is counterparty risk the new smile?
Replies: 8
Views: 9414

Is counterparty risk the new smile?

<t>Hi,I'm not so sure that Heston-parameter smile-fit modelling ever really went away. What we've seen is perhaps a vast unwind in the kind of complex structures (due to financial crisis) that made Heston calibration necessary in the first place. In addition, as models become "canonical", they are i...
by PvalAnal85
January 22nd, 2013, 8:08 pm
Forum: General Forum
Topic: Qn on Cheapest to deliver currency
Replies: 2
Views: 11600

Qn on Cheapest to deliver currency

<r>Hi,This isn't a simple question at all. The cheapest to deliver currency for collateral posting is a complex FX option on the value of deliverable collateral in the allowed currencies. One would need to discount portfolio cash flows on a "blended" OIS curve corresponding to the currencies in whic...
by PvalAnal85
January 22nd, 2013, 8:01 pm
Forum: General Forum
Topic: Cost of Collateral
Replies: 6
Views: 11109

Cost of Collateral

I think that what you're touching upon ("the cost of funding") is FVA, but this charge only applies to the portion of a portfolio that is <i>not collateralized</i>.
by PvalAnal85
January 22nd, 2013, 7:55 pm
Forum: General Forum
Topic: Cost of Collateral
Replies: 6
Views: 11109

Cost of Collateral

<t>Most institutions will only accept high-quality assets (such as T-bills) or cash for collateral, so the issuance-risk for the collateral itself is negligible for the amount of time the institution is funding itself (i.e. overnight).Also- because the institution is only borrowing overnight, the pr...
by PvalAnal85
December 18th, 2012, 9:02 pm
Forum: General Forum
Topic: Why are cleared swaps more strictly regulated than swap futures?
Replies: 4
Views: 10045

Why are cleared swaps more strictly regulated than swap futures?

<t>Thanks for your thoughts. A reason I heard on the street for 2-day vs 5-day holding period is "it will take longer to auction off IR swap instruments post-default due to their non-standard nature"- but this could easily be solved by creating standard contract features (like they did for CDS), so ...
by PvalAnal85
December 7th, 2012, 2:24 pm
Forum: General Forum
Topic: spread option
Replies: 4
Views: 9634

spread option

<r>CMS Spread Options can be calculated in closed form using normal joint density/Copula functions, as per this paper:<URL url="http://www.mathfinance2.com/MF_website/download.aspx?AttachmentRef=151I"><LINK_TEXT text="http://www.mathfinance2.com/MF_website/ ... ntRef=151I">http://www.mathfinance2.co...
by PvalAnal85
December 7th, 2012, 2:19 pm
Forum: General Forum
Topic: Why are cleared swaps more strictly regulated than swap futures?
Replies: 4
Views: 10045

Why are cleared swaps more strictly regulated than swap futures?

<t>Hi,With the new CME Deliverable/ Eris Standard swap futures only having a 2-day closeout period for initial margin calculations (vs. a 5-day closeout period for cleared swaps on the CME), I'm wondering: Why is this the case?If swaps are cleared centrally, they should pose no more of a systemic ri...
by PvalAnal85
December 5th, 2012, 6:19 pm
Forum: General Forum
Topic: OIS curve and cross currency basis
Replies: 2
Views: 11431

OIS curve and cross currency basis

<t>Hi Gammaslide,Why are you valuing a EUR swap with USD collateral? Is the USD collateral cheapest to deliver, and does the CSA agreement allow you to post USD collateral on a Euro trade? You're aware that ISDA are launching standardized CSAs very soon with 17 currency silos, so you shouldn't have ...
by PvalAnal85
November 28th, 2012, 5:05 pm
Forum: General Forum
Topic: Will Central Clearing remove the Convexity Adjustment between the Forward Rate and the Futures Rate?
Replies: 8
Views: 11639

Will Central Clearing remove the Convexity Adjustment between the Forward Rate and the Futures Rate?

<t>In relation to the Jeffries vs. IDCG case, there's recent news of ICE converting all their cleared energy swaps into "economically equivalent" futures.Are they 'economically equivalent'? (IDCG''s weren't!) And even if they're not, does the act of converting ALL swaps into futures remove the poten...
by PvalAnal85
November 19th, 2012, 6:41 pm
Forum: General Forum
Topic: Will Central Clearing remove the Convexity Adjustment between the Forward Rate and the Futures Rate?
Replies: 8
Views: 11639

Will Central Clearing remove the Convexity Adjustment between the Forward Rate and the Futures Rate?

@gjk77- thanks very much. I'll take a look at the Jeffries case you referred to.@ppauper- if you must know, PvalAnal stands for "Portfolio Valuation Analyst" (my old job title).
by PvalAnal85
November 16th, 2012, 3:25 pm
Forum: General Forum
Topic: Will Central Clearing remove the Convexity Adjustment between the Forward Rate and the Futures Rate?
Replies: 8
Views: 11639

Will Central Clearing remove the Convexity Adjustment between the Forward Rate and the Futures Rate?

<t>Hello,As I understand it, the reason that convexity basis exists between a LIBOR forward contract and a LIBOR futures contract is the mandatory margin deposit/withdrawal with the futures exchange whenever the MTM of the future moves out/in your favour. This need for daily margin comes at a drag o...
by PvalAnal85
November 14th, 2012, 4:14 pm
Forum: General Forum
Topic: Question on Initial Margin
Replies: 1
Views: 9681

Question on Initial Margin

<t>Hello,I have the following scenario/question around initial marginLet's say my portfolio contains a single futures contract X, which I clear on an exchange, and I put up Initial Margin (IM) calculated using some methodology (e.g. SPAN).A month later, I trade futures contract Y, so my portfolio co...
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