I've been looking around the internet but cannot find the exact answer to my question.
Normally when valuing an IRS one uses eonia (for eur swaps) to discount the cashflows.
Let's imagine I have a 30 year IRS for which both USD and EUR collateral can be posted (in bonds). Now the counterparty which is posting collateral has the option to post collateral in EUR bonds or in USD govt bonds (collateral funding option).
I have read that one cannot use the eonia curve anymore to discount the cashflows but has to use some sort of blended curve (or maybe just a curve with the highest interest rates for simplicity).
My question is:
Is it correct to use the USD ois curve to discount the swaps cashflows (when you have an IRS for which both EUR and USD govt bonds can be posted)? If yes how does this curve needs to be transformed (FX and x-ccy basis)? I assume one cannot just take the USD ois curve and use that for discounting.