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ksmchan
Topic Author
Posts: 6
Joined: May 18th, 2011, 2:40 pm

Basis swap valuation

August 17th, 2012, 3:24 am

Hi all,For basis swap, say USD libor 1m vs 3m, should I apply the 1x3 basis spread in the discount curve for valuation?Similar case for currency basis swap, say USD 3m libor vs JPY 3m libor, should I apply the currency basis spread in the discount curve for valuation?Thanks for help.Kevin
 
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John
Posts: 19
Joined: December 10th, 2001, 2:08 pm

Basis swap valuation

August 17th, 2012, 12:15 pm

Generally discount each leg off your funding levels.If no CSA then that would be the level at which you can borrow or lend.If you say have a zero threshold CSA with collateral returning an Overnight Index Rate then use an OIS curve for discounting.
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