While practitioners generally agree that fully collateralized trades should be discounted at the rate paid on the collateral, overnight rates instead of LIBOR, there is less agreement on exactly how to price partially collateralized or uncollateralized trades and how to include a funding charge in the price to reflect a firm’s true cost of funding. Moreover, optionality embedded in Credit Support Annexes (CSAs) can make the pricing exercise even more complicated.
- Collateral discounting and OIS
- Credit Support Annex
- A Primer on Funding Value Adjustment
- Intuitive FVA
- Case Study
- How do you pass on this charge?
- Conclusions
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