Endogenous credit derivatives and bank behavior

Thilo Pausch

No 2007,16, Discussion Paper Series 2: Banking and Financial Studies from Deutsche Bundesbank, Research Centre

Abstract: Instruments for credit risk transfer arise endogenously from and interact with optimizing behavior of their users. This is particularly true with credit derivatives which are usually OTC contracts between banks as buyers and sellers of credit risk. Recent literature, however, does not account for this fact when analyzing the effects of these instruments on banking. The present paper closes this gap by explicitly modelling the market for credit derivatives and its interaction with banks’ loan granting and deposit taking activities.

Keywords: credit risk; credit derivatives; bargaining (search for similar items in EconPapers)
JEL-codes: D53 D82 G11 G14 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-rmg
Date: Written 2007
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