Abstracts
Valuation and hedging of OTC contracts with funding costs and collateralization
Tomasz Bielecki (Illinois Institute of Technology, USA)
Thursday June 5, 14:00-14:30 | session 8.3 | Hedging | room EF
The research presented in this work is motivated by recent papers by Brigo at al., Crepey, Burgard and Kjaer, Fujii and Takahashi and Piterbarg. Our goal is to provide a sound theoretical underpinning for some results presented in these papers by developing a unified martingale framework for the non-linear approach to hedging and pricing of OTC financial contracts. The impact that various funding bases and margin covenants exert on the values and hedging strategies for OTC contracts is examined.