Banks’ pooling of corporate debt: An application of the restated diversification theorem

Frederik Lundtofte ()

The North American Journal of Economics and Finance, 2015, vol. 31, issue C, 249-263

Abstract: We analyze banks’ pooling of corporate loans and propose Pareto-improving sharing rules that depend only on the relative sizes of the loans. Implementation of these sharing rules do not require any precise knowledge of default probabilities or default correlations.

Keywords: Risk pooling; Probability of default; Default correlation; Corporate debt (search for similar items in EconPapers)
JEL-codes: C78 D80 G21 G32 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:31:y:2015:i:c:p:249-263

DOI: 10.1016/j.najef.2014.12.003

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