Before revision:  The haircut difference is synthesized in the pricing PDE's discount rateand the impact of repo financing cost is captured by collateral liquidity value adjustment (LVA) . Because a derivatives netting set's time horizon is much longer than repo tenors, a break-even repo formulae is employed to forecast the repo curve beyond three month tenor. Collateral optimization is formulated as an LVA driven linear programming problem .
After revision:  The haircut difference is synthesized in the pricing PDE's discount rateand the impact of repo financing cost is captured by collateral liquidity value adjustment (LVA) to be computed. A linear programming problem of maximizing LVA under liquidity coverage ratio (LCR) constraint is formulated as an LVA driven linear programming problem .