Multi-currency CSA chaos behind push to standardised CSA

A major split has emerged between dealers over how to price derivatives backed by multi-currency CSAs. Some banks are looking to arbitrage disparities in valuations as a result, causing back-loading of trades to central counterparties to slow to a trickle. A new standardised CSA may be the only way forward. Nick Sawyer reports

"It's difficult to stand in front of regulators and say the over-the-counter derivatives market is functioning well when we can’t even agree how to price a plain-vanilla interest rate swap.” So says one global head of interest rate derivatives at a major bank – and his concern is repeated again and again across the industry. Once seen as the simplest derivatives instruments to price, the major dealers now realise even plain-vanilla interest rate swaps can be exceptionally complicated to value in