Options for collateral options

When collateral can be posted in multiple currencies, pricing even the simplest derivatives involves optionality, which is often tackled numerically. But by conditioning on a risk factor to make variables independent, this can be simplified. Alexandre Antonov and Vladimir Piterbarg show this is both quicker and more accurate than more obvious methods

currency

Credit support annexes specify rules for posting collateral. If multiple currencies are allowed, then the party posting collateral has, now and at each future point in time, a choice of which currency to post. This choice leads to optionality that needs to be accounted for when valuing even the most basic of derivatives, such as forwards or swaps (see Piterbarg, 2012).

Options for collateral options

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here