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Clean Valuation Framework for the USD Silo -An implication for the forthcoming Standard Credit Support Annex (SCSA)-

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  • Masaaki Fujii

    (Graduate School of Ecocnomics, University of Tokyo)

  • Akihiko Takahashi

    (Faculty of Ecocnomics, University of Tokyo)

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    Abstract

    In the forthcoming ISDA Standard Credit Support Annex (SCSA), the trades denominated in non-G5 currencies as well as those include multiple currencies are expected to be allocated to the USD silo, where the contracts are collateralized by USD cash, or a different currency with an appropriate interest rate overlay to achieve the same economic effects. In this paper, we have presented a simple generic valuation framework for the clean price under the USD silo with the the detailed procedures for the initial term structure construction. We have also shown that Cross Currency Swap (CCS) basis spread can be expressed as a difference between two swap rates.

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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2011/2011cf829.pdf
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    Bibliographic Info

    Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-829.

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    Length: 16 pages
    Date of creation: Dec 2011
    Date of revision:
    Handle: RePEc:tky:fseres:2011cf829

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    1. Masaaki Fujii & Yasufumi Shimada & Akihiko Takahashi, 2009. "A Market Model of Interest Rates with Dynamic Basis Spreads in the presence of Collateral and Multiple Currencies," CARF F-Series CARF-F-196, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Apr 2011.
    2. Masaaki Fujii & Yasufumi Shimada & Akihiko Takahashi, 2009. "A Note on Construction of Multiple Swap Curves with and without Collateral," CARF F-Series CARF-F-154, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Jan 2010.
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