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I'm curious how the current negative Eonia (Euro OverNight Index Average) rates would impact derivatives pricing. Does it mean that if I post cash collateral to you, I also need to pay you interest?
More generally, does it mean that the classical interest-rate modelling assumption that interest rates can't go negative is now invalid?
Eonia's negative implies parties posting collateral must also pay interest to their counterparties, which has led to calls for clarity from dealers.
