Credit support annexes specify rules for posting collateral. If multiple currencies are allowed, then the party posting collateral has, now and at each future point in time, a choice of which currency to post. This choice leads to optionality that needs to be accounted for when valuing even the most basic of derivatives, such as forwards or swaps (see Piterbarg, 2012).
Options for collateral options
The week on Risk.net, July 7-13, 2018Receive this by email