It has been argued that underpriced federal deposit insurance provides incentive for insured institutions to increase the value of shareholder equity by expanding into activities that shift risk onto the deposit insurer. Derivative instruments have been used by firms to change their risk...

This article examines the major differences in the accounting and stock market characteristics of banking organizations that use derivatives relative to those that do not.

Credit derivative contracts offer a new route for managing counterparty exposures. This article discusses two formats of these contracts. The contracts have potential for providing portfolio managers with a cost effective, just-in-time source of liquidity.