An overview of the valuation of collateralized derivative contracts

Jean-Paul Laurent (), Philippe Amzelek () and Joe Bonnaud ()

Review of Derivatives Research, 2014, vol. 17, issue 3, 286 pages

Abstract: We consider the valuation of collateralized derivative contracts such as interest rate swaps or forward FX contracts. We allow for posting securities or cash in different currencies. In the latter case, we focus on using overnight index rates on the interbank market. Using time varying haircuts, we provide an intuitive way to derive the basic discounting results, keeping in line with the most standard theoretical and market views. In a number of cases associated with margining with major central counterparties, pricing rules for collateralized trades remain linear, thus the use of (multiple) discount curves. We also show how to deal with partial collateralization, involving haircuts, asymmetric CSA, counterparty risk and funding costs. We therefore intend to provide a unified view. Mathematical or legal details are not dealt with and we privilege financial insights and easy to grasp concepts and tools. Copyright Springer Science+Business Media New York 2014

Keywords: CCP Swaps Repos; OIS Haircuts; BSDE; G01; G12; G33 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11147-014-9098-8 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:revdev:v:17:y:2014:i:3:p:261-286

Ordering information: This journal article can be ordered from
http://www.springer. ... 29/journal/11147/PS2

DOI: 10.1007/s11147-014-9098-8

Access Statistics for this article

Review of Derivatives Research is currently edited by Gurdip Bakshi and Dilip Madan

More articles in Review of Derivatives Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().