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Pricing and Hedging of Contingent Credit Lines

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Author Info
Salih N. Neftci
Elena Loukoianova
Sunil Sharma

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Abstract

Contingent credit lines (CCLs) are widely used in bank lending and also play an important role in the functioning of short-term capital markets. Yet, their pricing and hedging has not received much attention in the finance literature. Using a financial engineering approach, the paper analyzes the structure of simple CCLs, examines methods for their pricing, and discusses the problems faced in hedging CCL portfolios.

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Publisher Info
Paper provided by International Monetary Fund in its series IMF Working Papers with number 06/13.

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Length: 26 pages
Date of creation: 24 Jan 2006
Date of revision:
Handle: RePEc:imf:imfwpa:06/13

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Related research
Keywords: Contingent credit lines ; Banking ; Capital markets ; Economic models ;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179. [Downloadable!] (restricted)
  2. Mosebach, Michael, 1999. "Market response to banks granting lines of credit," Journal of Banking & Finance, Elsevier, vol. 23(11), pages 1707-1723, November. [Downloadable!] (restricted)
  3. Shockley, Richard L & Thakor, Anjan V, 1997. "Bank Loan Commitment Contracts: Data, Theory, and Tests," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 517-34, November.
  4. Philipp J. Schönbucher, 2000. "A Libor Market Model with Default Risk," Bonn Econ Discussion Papers bgse15_2001, University of Bonn, Germany. [Downloadable!]
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This page was last updated on 2009-12-17.

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