Hello,I am facing the valuation of the following hypothetic FX fwd and I wonder if I should take into account the ccxy basis.I am a EUR bank and I issue: GBPUSD FX fwd I am valuing the FX fwd in euros in the following way:value in GBP=(mkt quote of the GBPUSD Fwd-Strike)*Notional in GBP*exp(-rUSD*T)value in EUR = value in GBP * (EURUSD Spot FX rate)I wonder if I should consider the USD-EUR ccxy basis in the discount rate rUSD above or any other effects to take into account that I am a european bank and the instrument is denominated in a different currency. Would it be different if the FX fwd were a NDF?Please any feedback would be appreciated!Thanks,

What are the terms of the CSA under which the FX fwd has been transacted? Specifically, what ccy is the collateral?

QuoteOriginally posted by: MartinghoulWhat are the terms of the CSA under which the FX fwd has been transacted? Specifically, what ccy is the collateral?Hello,Thanks for your reply.It is a non collateralized FX fwd.Thank you,

QuoteOriginally posted by: miscelaniaQuoteOriginally posted by: MartinghoulWhat are the terms of the CSA under which the FX fwd has been transacted? Specifically, what ccy is the collateral?Hello,Thanks for your reply.It is a non collateralized FX fwd.Thank you,So you have direct, uncollateralized exposure to the counterparty? You'll have to get creative then and use a discount rate that takes into account the riskiness of the counterparty (using CDS, bond yield, what have you).

OK. Thanks very much for your reply.In case it were collateralized (for instance in EUR) what difference would it make?Thank you

Then you'd apply a x-ccy basis-adjusted OIS rate, I guess. It also depends on what rates your traded fx fwd price is based on.

QuoteOriginally posted by: MartinghoulQuoteOriginally posted by: miscelaniaQuoteOriginally posted by: MartinghoulWhat are the terms of the CSA under which the FX fwd has been transacted? Specifically, what ccy is the collateral?Hello,Thanks for your reply.It is a non collateralized FX fwd.Thank you,So you have direct, uncollateralized exposure to the counterparty? You'll have to get creative then and use a discount rate that takes into account the riskiness of the counterparty (using CDS, bond yield, what have you).OK Thank you.Regarding your previous answer.Would you discount non collateralized derivatives with a credit spread? Instead, I thought that your discount factor should reflect your cost of funding... Or smthg like that...(I do not understand exactly the reason for these funding costs) Thank you

QuoteOriginally posted by: miscelaniaOK Thank you.Regarding your previous answer.Would you discount non collateralized derivatives with a credit spread? Instead, I thought that your discount factor should reflect your cost of funding... Or smthg like that...(I do not understand exactly the reason for these funding costs) Thank youSo I have tried to discuss this somewhat philosophical point on other threads. Your choice of the discount rate depends on whether you're marking-to-mkt or not (or some sort of a blend). I am not sure I can find the old thread, but it's here somewhere.

QuoteOriginally posted by: MartinghoulQuoteOriginally posted by: miscelaniaOK Thank you.Regarding your previous answer.Would you discount non collateralized derivatives with a credit spread? Instead, I thought that your discount factor should reflect your cost of funding... Or smthg like that...(I do not understand exactly the reason for these funding costs) Thank youSo I have tried to discuss this somewhat philosophical point on other threads. Your choice of the discount rate depends on whether you're marking-to-mkt or not (or some sort of a blend). I am not sure I can find the old thread, but it's here somewhere.OK. Thanks. If you found the thread by some chance and if you wouldn't mind to point it out I would be grateful.

This might be it, if my memory doesn't fail me...consistent valuation

QuoteOriginally posted by: MartinghoulThis might be it, if my memory doesn't fail me...consistent valuationOK thank you