Managing Credit Risk With Credit And Macro Derivatives

Udo Broll, Gerhard Schweimayer () and Peter Welzel ()

Schmalenbach Business Review (sbr), 2004, vol. 56, issue 4, 360-378

Abstract: We use the industrial organization approach to the microeconomic s of banking, augment Ed by uncertainty and risk aversion, to ex a mine c r edit derivatives and macro derivatives as instruments t o hedge c r edit risk for a large commercial bank. In a partial-analytic framework we distinguish between the probability of default and the loss given default ,model different forms of derivatives , and derive hedge rules and strong and weak separation properties between deposit and loan decisions on the one hand and hedging decisions on the o t her . We also suggest how bank-specific macro derivatives could be designed from common macro index as which serve as underlings of recently introduced financial products.

Keywords: Banking; Credit Derivative; Credit Risk; Macro Derivative; Systematic Risk. (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (2)

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