Price Impacts of Imperfect Collateralization

Kenichiro Shiraya and Akihiko Takahashi
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Kenichiro Shiraya: Faculty of Economics, The University of Tokyo
Akihiko Takahashi: Faculty of Economics, The University of Tokyo

No CIRJE-F-947, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper studies impacts of imperfect collateralization on derivatives values. Particu- larly, 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).

Pages: 27 pages
Date: 2014-11
New Economics Papers: this item is included in nep-rmg
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2014cf947

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