Just a theoretical question that pop up into my student mind.Do one-way CSAs have any cheapest to deliver value for the counterparty not posting collateral?On one hand they are not posting collateral you but on the other hand the CTD blended curve can be different from any existing market curve you are using to discount.So I wonder whether it has any value or a negative value as you will always the CTD collateral.Thanks,Alex

The collateral that you are allowed to post is "regulated" by the CSA. You tend to have cash (EUR, USD, GBP) valued at 100%. Then you have government bonds (<1y, 1y-<5y, 5y-<10y, 10y-<15y for the most part), which the ISDA standard (and most credit standards) allow you to use US Treasuries, UK Gilts, Bunds and OATs. Nothing else is typically allowed (Japanese bonds, for example, are way too expensive to procure). You have some CSAs where Agency (Ginnie Mae) bonds may be allowed but they have hefty haircuts tacked on to them.Now, you may be able to find "cheaper to deliver" government bonds, and post them as collateral but they are then affected by the valuation percentages of the collateral in the agreement. These valuation percentages range from 99-93% for government bonds, for corporate bonds it's a whole different ball game - 88-79% is what I have seen and agreed upon before. With that kind of valution, if you find a CTD 15Y US Treasury as compared to an on the run 15Y US Treasury, you will end up having to post more of it and have not just uncollateralized derivative exposure (youre only posting collateral, never receiving it so you have no typical CSA effect on your own derivative exposure) but also one-way CSA exposure to the collateral that you're posting. That has an effect on your CVA and also RWA figures, which makes the posting of a CTD bond more or less a moot point.CB