A Note on Construction of Multiple Swap Curves with and without Collateral
by Masaaki Fujii of the University of Tokyo,
January 25, 2010
Abstract: There are now available wide variety of swap products which exchange Libors with different currencies and tenors. Furthermore, the collateralization is becoming more and more popular due to the increased attention to the counter party credit risk. These developments require clear distinction among different type of Libors and the discounting rates. In this brief note, we will explain the method to construct the multiple swap curves consistently with all the relevant swaps with and without a collateral agreement.
Keywords: Libor, swap, tenor, yield curve, collateral, overnight index swap, cross currency, basis spread.