of collateral mitigation. We show that the adjustment is given by the sum of option payoff terms, depending on the netted … exposure, i.e. the difference between the on-default exposure and the pre-default collateral account. We specialize our … illustrate the impact of default correlation, collateral margining frequency, and collateral re-hypothecation on the resulting …

principle initiated by Buhlmann (1980). The derivative markets in our model are over-the-counter (OTC) markets and have … the collateral agreements. We also demonstrate whether our pricing approach is consistent with an another equilibrium … pricing rule in the point of the sensitivity of derivative prices …

market do not hold collateral against all the positions in their trading book and the paper proves an estimate of this under …-collateralization. Whatever collateral is held by banks is allowed to be rehypothecated (or re-used) to others. Since CCPs would require all … positions to have collateral against them, off-loading a significant portion of OTC derivatives transactions to central …