A General Framework for the Benchmark pricing in a Fully Collateralized Market (1508.06339v2)

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.