Credit risk transfer and contagion

  • Some have argued that recent increases in credit risk transfer are desirable because they improve the diversification of risk. Others have suggested that they may be undesirable if they increase the risk of financial crises. Using a model with banking and insurance sectors, we show that credit risk transfer can be beneficial when banks face uniform demand for liquidity. However, when they face idiosyncratic liquidity risk and hedge this risk in an interbank market, credit risk transfer can be detrimental to welfare. It can lead to contagion between the two sectors and increase the risk of crises. Klassifikation: G21, G22

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Metadaten
Author:Franklin Allen, Elena CarlettiGND
URN:urn:nbn:de:hebis:30-23376
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2005,25
Series (Serial Number):CFS working paper series (2005, 25)
Document Type:Working Paper
Language:English
Year of Completion:2005
Year of first Publication:2005
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2005/12/20
Tag:Banking; Financial Innovation; Insurance; Pareto Inferior
GND Keyword:Kreditrisiko; Bank; Versicherungswirtschaft
HeBIS-PPN:195631455
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht