In the wake of the crisis, the traditional assumption of a risk-free counterparty and rate has been shown to be false, yet it still underpins finance theory. Vladimir Piterbarg develops theoretical foundations for a model of an economy without a risk-free rate and with all assets traded on a collateralised basis. A cross-currency extension is considered, with a view to develop a model of multi-currency collateral choice.
[PDF] Slides of the presentation.