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Price Impacts of Imperfect Collateralization (Revised version of CARF-F-355; Subsequently published in "International Journal of Financial Engineering")

Author

Listed:
  • Kenichiro Shiraya

    (The University of Tokyo)

  • Akihiko Takahashi

    (The University of Tokyo)

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).

Suggested Citation

  • Kenichiro Shiraya & Akihiko Takahashi, 2015. "Price Impacts of Imperfect Collateralization (Revised version of CARF-F-355; Subsequently published in "International Journal of Financial Engineering")," CARF F-Series CARF-F-375, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf375
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    References listed on IDEAS

    as
    1. Masaaki Fujii & Akihiko Takahashi, 2012. "Collateralized CDS and Default Dependence -Implications for the Central Clearing," CARF F-Series CARF-F-281, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    2. Masaaki Fujii & Akihiko Takahashi, 2015. "Perturbative Expansion Technique for Non-linear FBSDEs with Interacting Particle Method," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 22(3), pages 283-304, September.
    3. Masaaki Fujii & Akihiko Takahashi, 2012. "Perturbative Expansion Technique for Non-linear FBSDEs with Interacting Particle Method," CARF F-Series CARF-F-278, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Jan 2015.
    4. Masaaki Fujii & Akihiko Takahshi, 2015. "Perturbative Expansion Technique for Non-linear FBSDEs with Interacting Particle Method," CIRJE F-Series CIRJE-F-954, CIRJE, Faculty of Economics, University of Tokyo.
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