A general framework for the benchmark pricing in a fully collateralized market

Masaaki Fujii () and Akihiko Takahashi
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Masaaki Fujii: Graduate School of Economics, University of Tokyo, 7-3-1, Hongo, Bunkyou-ku, Tokyo 113-0033, Japan
Akihiko Takahashi: Graduate School of Economics, University of Tokyo, 7-3-1, Hongo, Bunkyou-ku, Tokyo 113-0033, Japan

International Journal of Financial Engineering (IJFE), 2016, vol. 03, issue 03, 1-30

Abstract: Collateralization with daily margining has become a new standard in the post-crisis market. Although there appeared vast literature on a so-called multi-curve framework, a complete picture of a multi-currency setup with cross-currency basis can be rarely found since our initial attempts. This work gives its extension regarding a general framework of interest rates in a fully collateralized market. It gives a new formulation of the currency funding spread which is better suited for the general dependence. In the last half, it develops a discretization of the HJM framework with a fixed tenor structure, which makes it implementable as a traditional Market Model.

Keywords: Swap; collateral; derivatives; Libor; currency; OIS; basis; HJM; CSA (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S2424786316500195

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