Credit Derivatives and Bank Systemic Risk: Risk Enhancing or Reducing?

Alba Halili, Jean-Pierre Fenech () and Silvio Contessi

Finance Research Letters, 2021, vol. 42, issue C

Abstract: This study investigates the impact of credit derivative usage on U.S. bank holding companies' systemic risk from 2006 to 2018. The results show that an increase in bank holdings of credit derivatives subsequently increases their systemic risk. This is robust to a number of controls. Such findings have policy implications for regulators and market participants, as larger banks are in a higher risk category, potentially causing further disruption to financial markets.

Keywords: Credit derivatives; Systemic risk measures (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:42:y:2021:i:c:s1544612321000118

DOI: 10.1016/j.frl.2021.101930

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