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arXiv · 1508.06339

A General Framework for the Benchmark pricing in a Fully Collateralized Market

Masaaki Fujii·Akihiko Takahashi
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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.

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Masaaki Fujii, Akihiko Takahashi. 2015-09-07. A General Framework for the Benchmark pricing in a Fully Collateralized Market. https://arxiv.org/abs/1508.06339

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