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A NOTE ON CREDIT RISK TRANSFER AND THE MACROECONOMY

Macroeconomic Dynamics, 2018
The recent financial crisis highlighted the limits of the originate to distribute model of banking, but its nexus with the macroeconomy remains unexplored. I build a business cycle model with banks engaging in credit risk transfer (CRT) under informational externalities.
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Regulation, credit risk transfer, and bank lending [PDF]

, 2011
We integrate Basel II (and III) regulations into the industrial organization approach to banking and analyze lending behavior and risk sensitivity of a risk-neutral bank. The bank is exposed to credit risk and may use credit default swaps (CDS) for hedging purposes.
Thilo Pausch, Peter Welzel
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Credit Risk Transfer and the Forecasting of Bank Defaults

SSRN Electronic Journal, 2009
The current financial crisis has brought into sharp focus the need for robust empirical analysis of bank default prediction models. The contagion currently affecting the banking sector has its roots in traditional banking crises, i.e. inflated asset valuations and poor risk management. The difference, however, between past crises and that which appears
Giovanni Calice, Christos Ioannidis, Julian M. Williams   +2 more
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Credit risk transfer and financial sector stability

Journal of Financial Stability, 2006
Abstract In this paper, we study credit risk transfer (CRT) in an economy with endogenous financing (by both banks and non-bank institutions). Our analysis suggests that the incentive of banks to transfer credit risk is aligned with the regulatory objective of improving stability, and so the recent development of credit derivative instruments is to ...
Wagner, W.B., Marsh, I.
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Credit Risk Transfer with Single-Name Credit Default Swaps

2017
Credit default swaps (CDSs) are the primary type of derivatives contracts with which market participants can protect themselves against the risk of a default by one or more underlying reference entities. We explore the recent market activity in CDSs, as well as the mechanics of CDSs, including documentation, triggering credit events on underlying ...
Christopher L. Culp, Andria van der Merwe, Bettina J. Stärkle   +2 more
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The Effect of Credit Risk Transfer on Financial Stability

SSRN Electronic Journal, 2006
This paper shows under which conditions loan securitization, e.g. collateral debt obligations (CDOs) of banks can increase the systemic risks in the banking sector. We use a simple model to show how securitization can reduce the individual banks' economic capital requirements by transferring risks to other market participants and demonstrate that ...
Dirk G. Baur, Elisabeth Joossens
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Credit Risk Transfer Is Not a Panacea for Fannie and Freddie

The Journal of Structured Finance, 2017
Fannie and Freddie’s credit risk transfer (CRT) programs are a set of highly promoted and useful tools to hedge unexpected losses. Financial institutions, such as banks and insurance companies, use credit protection and risk transfer products similar to CRT to enhance or supplement regulatory capital levels and to absorb mostly unexpected risk.
Landon D. Parsons, Michael Shemi
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Solvency regulation and credit risk transfer [PDF]

, 2008
This paper analyzes the optimality of credit risk transfer (CRT) in banking. In a model where banks' main activity is to monitor loans, we show that a combination of CRT instruments, loan sales and credit derivatives, might be optimal to insure banks against shocks and to optimally redeploy capital when new investment opportunities arise, without ...
CERASI, VITTORIA, Rochet, JC
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Valuation of Complex Financial Instruments for Credit Risk Transfer

2011
The fair valuation of complex financial products for credit risk transfer (CRT) can provide a good basis for sustained growth of these markets and their recovery after the current financial crisis. Therefore, the risks of these structured credit securities (such as Collateralized Debt Obligations (CDO) and Credit Default Swap-Index tranches) have to be
Alfred Hamerle, Andreas Igl
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Credit risk transfer [PDF]

, 2003
Executive summary Techniques for transferring credit risk, such as financial guarantees and credit insurance, have been a long-standing feature of financial markets. In the past few years, however, the range of credit risk transfer (CRT) instruments and the circumstances in which they are used have widened considerably.
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