Managing Collateral & Utilizing CSA Discounting for Pricing Derivatives
Effective collateral management is becoming increasingly important to derivative practitioners, as more and more derivative trades are collateralized. According to the ISDA Margin Survey 2013 (June 2013), 73.7% of all OTC derivatives trades (cleared and non-cleared) are subject to collateral agreements, a dramatic increase from pre-crisis levels in 2007, when only 59% of trades had agreements in place. ISDA also estimates that the total collateral in circulation for non-cleared OTC derivative transactions is US $3.7 trillion, an increase of 177% from 2007.
As collateralization has become the norm, many market participants have observed a significant impact on valuations due to collateral conditions mandated by the Credit Support Annex (CSA). Flexible collateral posting terms (as well as other CSA terms) can increase the complexity of derivative valuations substantially, and practitioners must rethink their valuation approaches so they align with the terms of the CSA – a practice known as CSA discounting.
On Wednesday, December 11th featured speaker Anna Barbashova discussed best practices in collateral management and delved into the theoretical and practical aspects of CSA discounting.
Ms. Barbashova covered:
- Collateralization – drivers and trends
- Collateral management – complexities and best practices
- CSA discounting primer
- Pricing fully, partially, and non-collateralized deals
- Managing embedded optionality in CSAs
- Building Cheapest-to-Deliver (CTD) curves
- CSA discounting case study
Featured Speakers
Anna Barbashova
Ms. Barbashova is a member of the Numerix Client Solutions team, focused on developing market initiatives and the implementation of market standards within Numerix’s core analytics platform – Numerix CrossAsset. Ms. Barbashova holds an MA in Financial Mathematics from Columbia University.
As Chief Marketing Officer and Executive Vice President of Global Marketing & Corporate Communications, James leads the company’s global marketing and corporate communications efforts, spanning a diverse set of solutions and audiences. He oversees integrated marketing communications to clients in the largest global financial markets and to the Numerix partner network through the company's branding, electronic marketing, research, events, public relations, advertising and relationship marketing.
Since joining Numerix in 2008, James has launched the organization’s award-winning thought leadership program, bringing to light challenges and insights from Numerix market experts. He also hosts the Numerix Video Blog, tackling the challenges pressing the derivatives markets—from regulatory issues to trading strategies.
Prior to joining Numerix, James served as Managing Director of Global Marketing and Communications for Fitch Ratings. During his tenure at Fitch, he built the firm’s public relations program, oversaw investor relations and led marketing and communications plans for several acquisitions. Prior to Fitch, James was a member of the communications team at Moody's Investors Service.
