Buy-siders bemoan ‘dark arts’ of corporate bond CSA discounting

Litany of pricing variables fuel wide differences in how dealers calculate discount rates for collateral agreements

The-Dark-art-of-discounting montage

As more insurers and pension funds use corporate bonds as collateral in derivatives trades, concern is growing over how dealers are valuing these transactions.

Buy-side firms report little consensus among dealers over the method for calculating the discount rate for trades backed by so-called ‘dirty CSAs’ – credit support annexes that allow counterparties to post a range of collateral, including corporate bonds.

Jasper Livingsmith, head of G7 portfolio management at the European Bank for

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