wilmott.com

Okay. The scenario is you designate a basis swap with a collar as one unit. So lets say you have a 8 floor 10 celing on a collar and then you have a -.50 basis swap on top of that. The way i see it is that your desgnation or exposure price then becomes 7.50 and 9.50. My question is...I'm having trouble incorporating this into an option pricing model becasue the model is pricing it as if the 7.50 and the 9.50 is the collar by itlself. My only other option is to desingate it as 100% effective. BUT.....depedning upon how the trade will eventually settle I think there could be an ineffective portion albeit a small one. Does anyone know the proper treatmet or if this treatment is not FAS 133 compliant in the first place?

I think that you need to seek guidance under FAS148. We will do nothing w/ Pork Belly future. Cause, you know, you can't really count it until the bacon has been eaten.Hope that helps.Good luck!