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Persistent link: https://www.econbiz.de/10014546386
Credit Default Swaps, as the name indicates, are credit instruments used by banks, non-banking financial institutions, hedge funds and investors, so as to shift risk from one party to another (Mengle, 2007). These instruments are rife with controversy and opposing arguments with regard to...
Persistent link: https://www.econbiz.de/10014173832
Banks and other lenders often transfer credit risk to liberate capital for further loan intermediation. This paper aims to explore the design, prevalence and effectiveness of credit risk transfer (CRT). The focus is on the costs and benefits for the efficiency and stability of the financial...
Persistent link: https://www.econbiz.de/10014216392
We study the problem of finding the worst-case joint distribution of a set of risk factors given prescribed multivariate marginals with nonlinear loss function. The method has applications to any situation where marginals are provided, and bounds need to be determined on total portfolio risk....
Persistent link: https://www.econbiz.de/10013084222
This paper provides initial evidence on counterparty risk-mitigation activities of financial institutions on the basis of Depository Trust and Clearing Corporation's (DTCC) proprietary bilateral credit default swap transactions and positions. We show that financial institutions that are active...
Persistent link: https://www.econbiz.de/10012898023
Credit default swaps (CDSs) and deep out-of-the-money put (DOOMP) options can both be used as a credit protection instrument. However, partial market segmentation results in deviations between firm hazard rates implied by these contracts. These deviations are driven by a systematic...
Persistent link: https://www.econbiz.de/10012899167
Credit default swaps (CDS) are unfunded, or the synthetic form of credit exposure, while bonds are fully funded, thus the cash form. Borrowing this industry jargon, credit valuation adjustment (CVA) would be seen synthetic, because it is defined as the present value of buying a default...
Persistent link: https://www.econbiz.de/10013230524
Banks increasingly recognize the need to measure and manage the credit risk of their loans on a portfolio basis. We address the subportfolio "middle market". Due to their specific lending policy for this market segment it is an important task for banks to systematically identify regional and...
Persistent link: https://www.econbiz.de/10009768847
In almost every financial market crisis we can observe widening credit spreads, especially in the last years during the subprime and sovereign debt crisis. But what exactly drives the credit spread? This paper will outline static components, i.e. default risk, liquidity, risk and the relative...
Persistent link: https://www.econbiz.de/10009576035
This study analyzes the loss potential arising from investments into CDS for a sample of large U.S. and German mutual funds. Further, it investigates whether the comments funds make on CDS use in periodic fund reports are consistent with the disclosed CDS holdings. For several funds in the U.S.,...
Persistent link: https://www.econbiz.de/10010503880