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Pricing collateralized derivatives with an arbitrary numeraire
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Kennedy, Joanne E. (2020) Pricing collateralized derivatives with an arbitrary numeraire. Mathematical Finance, 30 (2). pp. 464-500. doi:10.1111/mafi.12227
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WRAP-pricing-collateralized-derivatives-arbitrary-numeraire-Kennedy-2019.pdf - Accepted Version - Requires a PDF viewer. Download (1459Kb) | Preview |
Official URL: https://doi.org/10.1111/mafi.12227
Abstract
Since the 2008 crisis collateralized derivatives have become commonplace in the market. There have been many papers in recent years on pricing collateralized derivatives but the topic has been surrounded by confusion with debate focusing on whether or not a risk‐free rate needs to be assumed. In addition, as pointed out by Bielecki and Rutkowski, several authors do not pay enough attention to the pricing measure they are working in when setting up their models. The contribution of this paper is to show the pricing formula for a collateralized derivative can be derived under the usual assumptions of an arbitrage‐free economy starting from any equivalent martingale measure and associated numeraire.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce Q Science > QA Mathematics |
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| Divisions: | Faculty of Science, Engineering and Medicine > Science > Statistics | ||||||||
| Library of Congress Subject Headings (LCSH): | Collateralized debt obligations -- Mathematical models, Credit derivatives, Risk -- Mathematical models | ||||||||
| Journal or Publication Title: | Mathematical Finance | ||||||||
| Publisher: | Wiley-Blackwell Publishing, Inc. | ||||||||
| ISSN: | 0960-1627 | ||||||||
| Official Date: | April 2020 | ||||||||
| Dates: |
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| Volume: | 30 | ||||||||
| Number: | 2 | ||||||||
| Page Range: | pp. 464-500 | ||||||||
| DOI: | 10.1111/mafi.12227 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Reuse Statement (publisher, data, author rights): | This is the peer reviewed version of the following article: Kennedy, Joanne E. (2019) Pricing collateralized derivatives with an arbitrary numeraire. Mathematical Finance, which has been published in final form at https://doi.org/10.1111/mafi.12227. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions. | ||||||||
| Access rights to Published version: | Restricted or Subscription Access |
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