  Over-the-counter derivatives have contributed significantly to the
effectiveness and efficiency of the international financial system but also
entail significant counterparty credit risk. Collateralization is one of the
most important and widespread credit risk mitigation techniques used in
derivatives transactions. However, the relevant decisions are often made in an
ad-hoc manner, without reference to an analytical framework. Very little
academic research has addressed the quantitative analysis of collateralization
for contingent credit risk control. The issue of mark-to-market timing becomes
important for reducing credit exposure of illiquid and long term derivative
contracts due to the difficulty and cost of marking to market. the goal of this
research is to propose a framework for minimizing the potential credit exposure
of collateralized derivative transactions by optimizing mark-to-market timing.
