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Price Impacts of Imperfect Collateralization

Author

Listed:
  • Kenichiro Shiraya

    (Faculty of Economics, The University of Tokyo)

  • Akihiko Takahashi

    (Faculty of Economics, The 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).

Suggested Citation

  • Kenichiro Shiraya & Akihiko Takahashi, 2014. "Price Impacts of Imperfect Collateralization," CIRJE F-Series CIRJE-F-947, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2014cf947
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    References listed on IDEAS

    as
    1. Damiano Brigo & Andrea Pallavicini & Vasileios Papatheodorou, 2011. "Arbitrage-Free Valuation Of Bilateral Counterparty Risk For Interest-Rate Products: Impact Of Volatilities And Correlations," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 14(06), pages 773-802.
    2. 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.
    3. Kenichiro Shiraya & Akihiko Takahashi, 2014. "Pricing Multiasset Cross‐Currency Options," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 34(1), pages 1-19, January.
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    Cited by:

    1. 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.
    2. 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.
    3. Masaaki Fujii, 2015. "Optimal Position Management for a Market Maker with Stochastic Price Impacts," Papers 1503.07007, arXiv.org, revised Sep 2015.
    4. Masaaki Fujii, 2015. "Optimal Position Management for a Market Maker with Stochastic Price Impacts," CARF F-Series CARF-F-360, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Sep 2015.
    5. Masaaki Fujii, 2015. "Optimal Position Management for a Market Maker with Stochastic Price Impacts," CIRJE F-Series CIRJE-F-963, CIRJE, Faculty of Economics, University of Tokyo.

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