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...

This paper presents a model of a banking industry with heterogeneous banks that delivers predictions on the relationship between banks'' risk of failure, market structure, bank ownership, and banks'' screening and bankruptcy costs. These predictions are explored empirically using a panel of...

Intro -- Contents -- I. Introduction -- II. Market Practice -- III. Modeling a CCL -- IV. Replicating Portfolio -- V. Pricing -- A. Method 1 -- B. Method 2 -- VI. Hedging Issues -- VII. Concluding Remarks -- References.