Collateral and Credit Issues in Derivatives Pricing

36 Pages Posted: 8 Feb 2013 Last revised: 24 Jun 2014

See all articles by John C. Hull

John C. Hull

University of Toronto - Rotman School of Management

Alan White

University of Toronto - Rotman School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: June 2014

Abstract

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

Hull, John C. and White, Alan, Collateral and Credit Issues in Derivatives Pricing (June 2014). Rotman School of Management Working Paper No. 2212953. Available at SSRN: https://ssrn.com/abstract=2212953 or http://dx.doi.org/10.2139/ssrn.2212953

John C. Hull (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
(416) 978-8615 (Phone)
416-971-3048 (Fax)

Alan White

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-978-3689 (Phone)
416-971-3048 (Fax)

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