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Security Baskets and Index-Linked Securities

Gorton, Gary B. - 2010

Security baskets and index-lined securities are securities whose values are functions of the cash flows or values of other assets. Creation of these "composite" securities would seem to be redundant since investors can cost1ess1y replicate them. In this paper we study the existence and optimal...

Persistent link: https://www.econbiz.de/10013138948

Credit Default Swaps and the Credit Crisis

Stulz, René M. - 2010

Many observers have argued that credit default swaps contributed significantly to the credit crisis. Of particular concern to these observers are that credit default swaps trade in the largely unregulated over-the-counter market as bilateral contracts involving counterparty risk and that they...

Persistent link: https://www.econbiz.de/10013150831

How Much Do Banks Use Credit Derivatives to Reduce Risk?

Minton, Bernadette A. - 2010

This paper examines the use of credit derivatives by US bank holding companies from 1999 to 2003 with assets in excess … of one billion dollars. Using the Federal Reserve Bank of Chicago Bank Holding Company Database, we find that in 2003 … represent on average two thirds of the assets of bank holding companies with assets in excess of $1 billion. Few banks are net …

Persistent link: https://www.econbiz.de/10012762392

The Market for OTC Derivatives

Atkeson, Andrew - 2013

We develop a model of equilibrium entry, trade, and price formation in over-the- counter (OTC) markets. Banks trade derivatives to share an aggregate risk subject to two trading frictions: they must pay a fixed entry cost, and they must limit the size of the positions taken by their traders...

Persistent link: https://www.econbiz.de/10013084727

Market Evaluations of Banking Fragility in Japan : Japan Premium, Stock Prices, and Credit Derivatives

Ito, Takatoshi - 2010

credit derivative spreads of Japanese banks. Although the Japan premium in the euro-dollar market seemed to have virtually … 1999, the markets were more sensitive to bank vulnerability and higher premiums were required …

Persistent link: https://www.econbiz.de/10012762833

A Direct Approach to Arbitrage-Free Pricing of Credit Derivatives

Das, Sanjiv Ranjan - 2010

to compute more complicated derivative securities …

Persistent link: https://www.econbiz.de/10012763833

Option-Based Credit Spreads

Culp, Christopher L. - 2014

We present a novel empirical benchmark for analyzing credit risk using “pseudo firms” that purchase traded assets financed with equity and zero-coupon bonds. By no-arbitrage, pseudo bonds are equivalent to Treasuries minus put options on pseudo-firm assets. Empirically, like corporate...

Persistent link: https://www.econbiz.de/10013039754

Financial Dampening

Wieland, Johannes - 2016

monetary policy. The theory unifies an endogenous supply of illiquid local loans and risk-sharing among subsidiaries of bank …

Persistent link: https://www.econbiz.de/10012995512

Speculation and Risk Sharing with New Financial Assets

Simsek, Alp - 2011

While the traditional view of financial innovation emphasizes the risk sharing role of new financial assets, belief disagreements about these assets naturally lead to speculation, which represents a powerful economic force in the opposite direction. This paper investigates the effect of...

Persistent link: https://www.econbiz.de/10013119601

Macro-Prudential Policy in a Fisherian Model of Financial Innovation

Bianchi, Javier - 2012

The interaction between credit frictions, financial innovation, and a switch from optimistic to pessimistic beliefs played a central role in the 2008 financial crisis. This paper develops a quantitative general equilibrium framework in which this interaction drives the financial amplification...

Persistent link: https://www.econbiz.de/10013106662

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