Pricing collateralised options in the presence of counterparty credit risk : an extension of the Heston–Nandi model
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Date
Authors
Venter, Pierre Johan
Mare, Eben
Journal Title
Journal ISSN
Volume Title
Publisher
South African Statistical Association
Abstract
In this paper, a closed-formexpression for a collateralised European option in the
presence of counterparty credit risk and stochastic volatility is derived. The model
is applied to Standard and Poor’s 500 index options. The model prices obtained are
consistent with expectations.
Description
Keywords
Collateral, Counterparty credit risk, Option pricing, Generalized autoregressive conditional heteroskedasticity (GARCH)
Sustainable Development Goals
Citation
Venter, P.J. & Mare, E. 2022, 'Pricing collateralised options in the presence of counterparty credit risk : an extension of the Heston–Nandi model', South African Statistical Journal, vol. 56, no. 1, pp. 37-51, doi : 10.37920/sasj.2022.56.1.3.