Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOD
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Derivatives
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Derivatives

The Journal of Derivatives

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JOD
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

A Derivatives Pricing Model with Non-Cash Collateralization

Kazuhiro Takino
The Journal of Derivatives Fall 2021, jod.2020.1.126; DOI: https://doi.org/10.3905/jod.2020.1.126
Kazuhiro Takino
is a professor in the faculty of commerce in the Graduate School of Management at Nagoya University of Commerce and Business in Nagoya, Japan
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.

Don’t have access? Click here to request a demo 

Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600

Abstract

This article proposes a derivatives pricing model with both cash and a non-cash asset posted as collateral for a derivatives contract. We assume that the participant sources funds from the repo market for the posted non-cash collateral. Our pricing formula is based on the investment of the received collaterals. For the pricing formula, we discount the future derivatives value using a combination of the collateral and repo rates under a risk-neutral measure. Thus, our pricing model constructs a multi-curve framework. We calibrate our pricing model for JPY interest rate derivatives and then show that our model with non-cash collateralization is closer to the real price than the existing pricing formulae (i.e., the cash collateralization and simple short rate models).

TOPICS: Derivatives, interest-rate and currency swaps, quantitative methods, statistical methods, risk management, credit risk management

Key Findings

  • ▪ A derivatives pricing model when cash and a non-cash asset are posted as collateral is proposed. The non-cash collateral receiver exchanges the posted collateral for cash in the repo market.

  • ▪ Under this framework, the discount rate in the resulting pricing formula is given as the weighted average of the collateral and repo rates weighted with the amount of the cash collateral.

  • ▪ The accuracy of the proposed pricing formula is superior to the pricing formula with the OIS discount that has been common after the financial crisis in 2008.

  • © 2020 Pageant Media Ltd
View Full Text

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Derivatives: 28 (3)
The Journal of Derivatives
Vol. 28, Issue 3
Spring 2021
  • Table of Contents
  • Index by author
  • Complete Issue (PDF)
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Derivatives.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
A Derivatives Pricing Model with Non-Cash Collateralization
(Your Name) has sent you a message from The Journal of Derivatives
(Your Name) thought you would like to see the The Journal of Derivatives web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
A Derivatives Pricing Model with Non-Cash Collateralization
Kazuhiro Takino
The Journal of Derivatives Dec 2020, jod.2020.1.126; DOI: 10.3905/jod.2020.1.126

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
A Derivatives Pricing Model with Non-Cash Collateralization
Kazuhiro Takino
The Journal of Derivatives Dec 2020, jod.2020.1.126; DOI: 10.3905/jod.2020.1.126
del.icio.us logo Digg logo Reddit logo Twitter logo CiteULike logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • Literature Review
    • Multi-curve in Denominations with Different Currencies
    • Multi-curve in Imperfect Collateralization
    • Multi-curve in Funding of Cash or Underlying Assets for Hedging Derivatives
    • Multi-curve in Non-cash Collateralization
    • Aims of This Study
    • MODEL AND PRICING
    • NUMERICAL EXAMPLE
    • CONCLUDING REMARKS
    • ACKNOWLEDGEMENTS
    • APPENDIX A
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • No citing articles found.
  • Google Scholar
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • Home
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Log In
  • Update your profile
  • Give us your feedback

© 2021 Pageant Media Ltd | All Rights Reserved | ISSN: 1074-1240 | E-ISSN: 2168-8524

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies