Price impacts of imperfect collateralization

Kenichiro Shiraya and Akihiko Takahashi ()
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Kenichiro Shiraya: Graduate School of Economics, University of Tokyo, 7-3-1, Hongo, Bunkyou-ku, Tokyo 113-0033, Japan
Akihiko Takahashi: Graduate School of Economics, University of Tokyo, 7-3-1, Hongo, Bunkyou-ku, Tokyo 113-0033, Japan

International Journal of Financial Engineering (IJFE), 2016, vol. 03, issue 01, 1-31

Abstract: This paper studies impacts of imperfect collateralization on derivatives values. Particularly, we investigate option prices in no collateral posting and time-lagged collateral posting cases with stochastic volatility, interest rate, and default intensity models, where a stochastic collateral asset value may depend on the values of the assets different from the underlying contract. We also derive an approximation of the credit value adjustment (CVA)’s density function in pricing forward contract with bilateral counter party risk, which seems useful in evaluation of the CVA’s Value-at-Risk (VaR).

Keywords: Credit risk; collateral; CVA; pre-default value; derivatives pricing (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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DOI: 10.1142/S2424786316500043

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