Arbeitspapier
Mitigating counterparty risk
This paper provides initial evidence on counterparty risk-mitigation activities of financial institutions on the basis of Depository Trust and Clearing Corporation's (DTCC) proprietary bilateral credit default swap transactions and positions. We show that financial institutions that are active buyers of protection from a specific counterparty undertake successive contracts and purchase protection written on them, even avoiding wrong-way risk mitigation. Higher stock return and CDS price volatility, lower past stock returns, and higher CDS prices of the counterparty are shown to have an increasing effect on the hedging behaviour against the counterparty. As the current regulatory frameworks explicitly formulate any protection purchase on the counterparty would diminish the required capital, this type of risk mitigation could follow regulatory capital relief motives and provides a viable hedging instrument beyond receiving coverage through collateral.
- ISBN
-
978-3-95729-499-9
- Sprache
-
Englisch
- Erschienen in
-
Series: Bundesbank Discussion Paper ; No. 35/2018
- Klassifikation
-
Wirtschaft
Portfolio Choice; Investment Decisions
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- Thema
-
credit default swaps
DTCC
OTC markets
hedging
Basel III
CRR
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Gündüz, Yalin
- Ereignis
-
Veröffentlichung
- (wer)
-
Deutsche Bundesbank
- (wo)
-
Frankfurt a. M.
- (wann)
-
2018
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:41 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Gündüz, Yalin
- Deutsche Bundesbank
Entstanden
- 2018
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