Credit Derivatives, Disintermediation, and Investment Decisions

Alan D. Morrison
Additional contact information
Alan D. Morrison: Said Business School, University of Oxford

The Journal of Business, 2005, vol. 78, issue 2, 621-648

Abstract: The credit derivatives market provides a liquid but opaque forum for secondary market trading of banking assets. I show that, when entrepreneurs rely on the certification value of bank debt to obtain cheap bond market finance, the existence of a credit derivatives market may cause them to issue sub-investment grade bonds instead and engage in second-best behavior. Credit derivatives can therefore cause disintermediation and thus reduce welfare. I argue that this effect can be most effectively countered by the introduction of reporting requirements for credit derivatives.

Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (122)

Downloads: (external link)
http://dx.doi.org/10.1086/427641 main text (application/pdf)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:78:y:2005:i:2:p:621-648

Access Statistics for this article

More articles in The Journal of Business from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().