Collateral and Credit Issues in Derivatives Pricing
36 Pages Posted: 8 Feb 2013 Last revised: 24 Jun 2014
Date Written: June 2014
Regulatory changes are increasing the importance of collateral agreements and credit issues in over-the-counter derivatives transactions. This paper considers the nature of derivatives collateral agreements and examines the impact of collateral agreements, two-sided credit risk, funding costs, liquidity, and bid-offer spreads on the valuation of derivatives portfolios.
Keywords: Derivatives Pricing, Collateral, Credit Risk, CVA, DVA, FVA
JEL Classification: G21, G23
Suggested Citation: Suggested Citation