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Should Derivatives Be Privileged in Bankruptcy?

Bolton, Patrick - 2011

Derivative contracts, swaps, and repos enjoy "super-senior" status in bankruptcy: they are exempt from the automatic …, even though this risk could be borne more efficiently by derivative counterparties. In addition, because super …-senior derivatives dilute existing creditors, they may lead firms to take on derivative positions that are too large from a social …

Persistent link: https://www.econbiz.de/10013118249

Financial Dampening

Wieland, Johannes - 2016

We propose a novel mechanism, “financial dampening,” whereby loan retrenchment by banks attenuates the effectiveness of monetary policy. The theory unifies an endogenous supply of illiquid local loans and risk-sharing among subsidiaries of bank holding companies (BHCs). We derive an...

Persistent link: https://www.econbiz.de/10012995512

Default Risk Sharing between Banks and Markets : The Contribution of Collateralized Debt Obligations

Franke, Günter - 2010

This paper contributes to the economics of financial institutions risk management by exploring how loan securitization affects their default risk, their systematic risk, and their stock prices. In a typical CDO transaction a bank retains through a first loss piece a very high proportion of the...

Persistent link: https://www.econbiz.de/10012761910

Option-Based Credit Spreads

Culp, Christopher L. - 2014

We present a novel empirical benchmark for analyzing credit risk using “pseudo firms” that purchase traded assets financed with equity and zero-coupon bonds. By no-arbitrage, pseudo bonds are equivalent to Treasuries minus put options on pseudo-firm assets. Empirically, like corporate...

Persistent link: https://www.econbiz.de/10013039754

How Much Do Banks Use Credit Derivatives to Reduce Risk?

Minton, Bernadette A. - 2010

This paper examines the use of credit derivatives by US bank holding companies from 1999 to 2003 with assets in excess of one billion dollars. Using the Federal Reserve Bank of Chicago Bank Holding Company Database, we find that in 2003 only 19 large banks out of 345 use credit derivatives....

Persistent link: https://www.econbiz.de/10012762392

A Direct Approach to Arbitrage-Free Pricing of Credit Derivatives

Das, Sanjiv R. - 2010

to compute more complicated derivative securities …

Persistent link: https://www.econbiz.de/10012763833

Does the Geographic Expansion of Bank Assets Reduce Risk?

Götz, Martin - 2014

We develop a new identification strategy to evaluate the impact of the geographic expansion of bank holding company (BHC) assets across U.S. metropolitan statistical areas (MSAs) on BHC risk. We find that the geographic expansion of bank assets reduces risk. Moreover, geographic expansion...

Persistent link: https://www.econbiz.de/10013039767

Procyclical Leverage and Value-at-Risk

Adrian, Tobias - 2013

The availability of credit varies over the business cycle through shifts in the leverage of financial intermediaries. Empirically, we find that intermediary leverage is negatively aligned with the banks' Value-at-Risk (VaR). Motivated by the evidence, we explore a contracting model that captures...

Persistent link: https://www.econbiz.de/10013083803

The Insurance is the Lemon : Failing to Index Contracts

Hartman-Glaser, Barney - 2019

We model the widespread failure of contracts to share risk using available indices. A borrower and lender can share risk by conditioning repayments on an index. The lender has private information about the ability of this index to measure the true state that the borrower would like to hedge. The...

Persistent link: https://www.econbiz.de/10012894992

Do Banks Pass Through Credit Expansions to Consumers Who Want to Borrow?

Agarwal, Sumit - 2015

We propose a new approach to studying the pass-through of credit expansion policies that focuses on frictions, such as asymmetric information, that arise in the interaction between banks and borrowers. We decompose the effect of changes in banks' cost of funds on aggregate borrowing into the...

Persistent link: https://www.econbiz.de/10013015102