An Economic Examination of Collateralization in Different Financial Markets

Xiao, Tim

doi:10.2139/ssrn.2267517

“…If the counterparty portfolio is collateralized, we can calculate the risky value based on equation (21) of Xiao (2013b). If there is no collateral agreement, we can price the portfolio according to Proposition 4 in this paper.…”

Section: Termsmentioning

confidence: 99%

An Accurate Solution for Credit Valuation Adjustment (CVA) and Wrong Way Risk

Xiao¹

2019

Preprint

Self Cite

0

View full text Add to dashboard Cite

This paper presents a Least Square Monte Carlo approach for accurately calculating credit value adjustment (CVA). In contrast to previous studies, the model relies on the probability distribution of a default time/jump rather than the default time itself, as the default time is usually inaccessible. As such, the model can achieve a high order of accuracy with a relatively easy implementation. We find that the valuation of a defaultable derivative is normally determined via backward induction when their payoffs could be positive or negative. Moreover, the model can naturally capture wrong or right way risk. https://frenxiv.org/2rtya/download

show abstract

“…If the counterparty portfolio is collateralized, we can calculate the risky value based on equation 21of Xiao (2013b). If there is no collateral agreement, we can price the portfolio according to Proposition 4 in this paper.…”

Section: B5 Cva Calculationmentioning

confidence: 99%

An Accurate Solution for Credit Value Adjustment (CVA) and Wrong Way Risk

Xiao¹

2015

JFI

Self Cite

View full text Add to dashboard Cite

This paper presents a Least Square Monte Carlo approach for accurately calculating credit value adjustment (CVA). In contrast to previous studies, the model relies on the probability distribution of a default time/jump rather than the default time itself, as the default time is usually inaccessible. As such, the model can achieve a high order of accuracy with a relatively easy implementation. We find that the valuation of a defaultable derivative is normally determined via backward induction when their payoffs could be positive or negative. Moreover, the model can naturally capture wrong or right way risk.

show abstract

“…Clearly, the longer the margin period of risk is the larger the collateralized exposure is. For a more detailed discussion on collateralization, see Xiao (2013b).…”

Section: B4 Margin (Or Collateral) Agreementsmentioning

confidence: 99%

An Accurate Solution for Credit Value Adjustment (CVA) and Wrong Way Risk

Xiao

¹

2013

Self Cite

View full text Add to dashboard Cite

This paper presents a new framework for credit value adjustment (CVA) that is a relatively new area of financial derivative modeling and trading. In contrast to previous studies, the model relies on the probability distribution of a default time/jump rather than the default time itself, as the default time is usually inaccessible. As such, the model can achieve a high order of accuracy with a relatively easy implementation. We find that the prices of risky contracts are normally determined via backward induction when their payoffs could be positive or negative. Moreover, the model can naturally capture wrong or right way risk.

show abstract

An Economic Examination of Collateralization in Different Financial Markets

Cited by 3 publications

References 24 publications

An Accurate Solution for Credit Valuation Adjustment (CVA) and Wrong Way Risk

An Accurate Solution for Credit Valuation Adjustment (CVA) and Wrong Way Risk

An Accurate Solution for Credit Value Adjustment (CVA) and Wrong Way Risk

An Accurate Solution for Credit Value Adjustment (CVA) and Wrong Way Risk

Contact Info

Product

Resources

About