Abstract
CCPs are planning a big bang-like collateral and discounting transition for USD. In theory this transition is done with value compensation and risk exchange at fair market value. Such a transition would conduce to the absence of value and risk impact. But by definition of big bang, the transition is done in an illiquid market for which the fair theoretical value is unknown. To understand the actual impact on valuation and risk, one has to look at the practical details of the transition and how the absence of data for half of the required theoretical quantities is overcome in practice. The resulting situation prompts exotic convexity adjustments for cleared swap and unknown valuation for non-cleared products.
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