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Risikomanagement mit Kreditoptionen

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Abstract

During recent years markets for credit derivatives have developed considerably. Innovative financial instruments offer new ways to banks to manage credit risk. In this paper we use a simple microeconomic model to show how a credit option of the put type can be used by a bank's risk-averse management to hedge against credit risk. We find that under optimal hedging the Value at Risk is zero and the bank chooses to over-hedge.

Suggested Citation

  • Udo Broll & Peter Welzel, 2002. "Risikomanagement mit Kreditoptionen," Discussion Paper Series 231, Universitaet Augsburg, Institute for Economics.
  • Handle: RePEc:aug:augsbe:0231
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    File URL: https://www.wiwi.uni-augsburg.de/vwl/institut/paper/231.pdf
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    References listed on IDEAS

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    1. Thilo Pausch & Peter Welzel, 2002. "Credit Risk and the Role of Capital Adequacy Regulation," Discussion Paper Series 224, Universitaet Augsburg, Institute for Economics.
    2. Udo Broll & Thilo Pausch & Peter Welzel, 2002. "Credit Risk and Credit Derivatives in Banking," Discussion Paper Series 228, Universitaet Augsburg, Institute for Economics.
    3. Froot, Kenneth A & Scharfstein, David S & Stein, Jeremy C, 1993. " Risk Management: Coordinating Corporate Investment and Financing Policies," Journal of Finance, American Finance Association, vol. 48(5), pages 1629-1658, December.
    4. Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    credit risk; credit derivative; hedging; option;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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