An Analytical Review of Credit Risk Transfer Instruments
AbstractOver the second half of the 1990s, the surfacing of credit derivatives and collateralised debt obligations enlarged the range of instruments for transferring credit risk. Although the characteristics and purposes of the former are very similar to those of the latter, the tradability of the new instruments has resulted in the creation of true markets for credit risk transfer (CRT), which are very rapidly developing. CRT markets are of great interest as regards financial stability: while offering extended risk management opportunities for market participants, they also alter âtraditionalâ relationships (between lenders and borrowers) as well as creating new types of relationships (lenders and credit protection sellers). The present review relies on existing theoretical and empirical work as well as on contacts with market practitioners to explore, from an analytical standpoint, the financial stability implications of all types of CRT instruments. In particular, it analyses the characteristics of differing CRT instruments in light of risk management and asymmetric information problems arising in financial markets. It also proposes possible avenues for further work. Four questions are successively raised: For what purposes are these products designed; why use one instrument rather than another? Who assesses credit risk: lenders, protection sellers or both? How are CRT instruments priced in practice: does pricing primarily reflect credit risk or does it also incorporate additional elements, such as counterparty, documentation or market risks? What are the potential macro-financial implications of CRT markets?
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by National Bank of Belgium in its journal Financial Stability Review.
Volume (Year): 1 (2003)
Issue (Month): 1 (June)
Contact details of provider:
Postal: Boulevard de Berlaimont 14, B-1000 Bruxelles
Phone: (+ 32) (0) 2 221 25 34
Fax: (+ 32) (0) 2 221 31 62
Web page: http://www.nbb.be/
More information through EDIRC
Other versions of this item:
- Kiff, J. & Michaud, F L. & Mitchell, J., 2003. "An analytical review of credit risk tranfer instruments," Financial Stability Review, Banque de France, issue 2, pages 106-131, June.
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Wagner, Wolf & Marsh, Ian W., 2006. "Credit risk transfer and financial sector stability," Journal of Financial Stability, Elsevier, vol. 2(2), pages 173-193, June.
- Goderis, Benedikt & Wagner, Wolf, 2009. "Credit Derivatives and Sovereign Debt Crises," MPRA Paper 17314, University Library of Munich, Germany.
- Redak, Vanessa & Weiss, Eleonora, 2004. "Innovative Credit Risk Transfer Instruments and Financial Stability in Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 7.
- Parlour, Christine A. & Winton, Andrew, 2013. "Laying off credit risk: Loan sales versus credit default swaps," Journal of Financial Economics, Elsevier, vol. 107(1), pages 25-45.
- Bengtsson, E., 2013. "Fund Management and Systemic Risk - Lessons from the Global Financial Crisis," CITYPERC Working Paper Series 2013-06, Department of International Politics, City University London.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.