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Endogenous credit derivatives and bank behavior

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  • Pausch, Thilo

Abstract

Instruments for credit risk transfer arise endogenously from and interact with optimizing behavior of their users. This is particularly true with credit derivatives which are usually OTC contracts between banks as buyers and sellers of credit risk. Recent literature, however, does not account for this fact when analyzing the effects of these instruments on banking. The present paper closes this gap by explicitly modelling the market for credit derivatives and its interaction with banks? loan granting and deposit taking activities.

Suggested Citation

  • Pausch, Thilo, 2007. "Endogenous credit derivatives and bank behavior," Discussion Paper Series 2: Banking and Financial Studies 2007,16, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdp2:6928
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    File URL: https://www.econstor.eu/bitstream/10419/19775/1/200716dkp_b_.pdf
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    References listed on IDEAS

    as
    1. Hashem Pesaran & Davide Pettenuzzo & Allan Timmermann, 2007. "Learning, Structural Instability, and Present Value Calculations," Econometric Reviews, Taylor & Francis Journals, vol. 26(2-4), pages 253-288.
    2. Taylor, Mark P. & Schmidt, Markus & Reitz, Stefan, 2007. "End-user order flow and exchange rate dynamics," Discussion Paper Series 1: Economic Studies 2007,05, Deutsche Bundesbank.
    3. repec:rus:hseeco:318682 is not listed on IDEAS
    4. Strotmann, Harald & Döpke, Jörg & Buch, Claudia M., 2006. "Does trade openness increase firm-level volatility?," Discussion Paper Series 1: Economic Studies 2006,40, Deutsche Bundesbank.
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    More about this item

    Keywords

    credit risk; credit derivatives; bargaining;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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