A Note on Hedging a Loan Portfolio

Udo Broll and Peter Welzel ()

No 250, Discussion Paper Series from Universitaet Augsburg, Institute for Economics

Abstract: In the framework of the industrial economics approach to banking we extend the analysis of hedging against default on loans to the case of two types of credit risk. Standard results on the optimal hedge volume and the hedging effectivity from the single-risk case are shown to carry over to the portfolio case in a non-trivial but intuitive way.

Keywords: banking; credit risk; loan portfolio; credit derivative; hedging effectivity (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2003-09
New Economics Papers: this item is included in nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:aug:augsbe:0250

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