Managing Credit Risk With Credit And Macro Derivatives
AbstractWe 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.
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Bibliographic InfoArticle provided by LMU Munich School of Management in its journal Schmalenbach Business Review.
Volume (Year): 56 (2004)
Issue (Month): 4 (October)
Banking; Credit Derivative; Credit Risk; Macro Derivative; Systematic Risk.;
Other versions of this item:
- Udo Broll & Gerhard Schweimayer & Peter Welzel, 2003. "Managing Credit Risk with Credit and Macro Derivatives," Discussion Paper Series 252, Universitaet Augsburg, Institute for Economics.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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- Thilo Pausch & Gerhard Schweimayer, 2004. "Hedging with Credit Derivatives and its Strategic Role in Banking Competition," Discussion Paper Series 260, Universitaet Augsburg, Institute for Economics.
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