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mirror80
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Posts: 7
Joined: November 28th, 2011, 2:16 am

Qn on Cheapest to deliver currency

January 9th, 2013, 12:24 am

How do you determine what is the cheapest to deliver currency in collateral management?
 
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berndL
Posts: 171
Joined: August 22nd, 2007, 3:46 pm

Qn on Cheapest to deliver currency

January 14th, 2013, 3:17 pm

The one with the lowest funding costs for you (if you are net behind in your portfolio). The other way around maybe if you are net getting the collateral? If you need dollar funding but this is expensive for you then you might be happy with usd collateral if you get it. Not of course if you have to post it.Hope this helps.
 
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PvalAnal85
Posts: 37
Joined: May 26th, 2009, 6:23 pm

Qn on Cheapest to deliver currency

January 22nd, 2013, 8:08 pm

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 which you're allowed to post collateral under the CSA agreement.The above is so difficult to do that ISDA has introduced new standard CSAs that bucket collateral currencies into 17 different silos. See article:http://www.risk.net/risk-magazine/featu ... a/page/2If this gains traction, hopefully you won't need to ask this question any more
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