Managing credit risk with credit and macro derivatives

Arbeitspapier

The industrial organization approach to the microeconomics of banking augmented by uncertainty and risk aversion is used to examine credit derivatives and macro derivatives as instruments to hedge credit risk for a large com- mercial bank. In a partial-analytic framework we distinguish between the probability of default and the loss given default, model different forms of derivatives, and derive hedge rules and strong and weak separation properties between deposit and loan decisions on the one hand and hedging decisions on the other. We also suggest how bank-specific macro derivatives could be designed from common macro indices which serve as underlyings of recently introduced financial products.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Volkswirtschaftliche Diskussionsreihe ; No. 252

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: banking ; credit risk ; systematic risk ; credit derivative ; macro derivative ; Kreditrisiko ; Risikomanagement ; Hedging ; Finanzderivat ; Konjunktur ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Welzel, Peter ; Schweimayer, Gerhard ; Broll, Udo
• Event: Veröffentlichung
• (who): Universität Augsburg, Institut für Volkswirtschaftslehre
• (where): Augsburg
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/22775
• Last update: 10.03.2025, 11:44 AM CET