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    <title>EconStor Community: Deutsche Bundesbank, Forschungszentrum, Frankfurt am Main</title>
    <link>http://hdl.handle.net/10419/22</link>
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      <title>The price impact of CDS trading</title>
      <link>http://hdl.handle.net/10419/74802</link>
      <description>Title: The price impact of CDS trading
&lt;br/&gt;
&lt;br/&gt;Authors: Gündüz, Yalin; Nasev, Julia; Trapp, Monika
&lt;br/&gt;
&lt;br/&gt;Abstract: In this paper we show that informational and real frictions in CDS markets strongly affect CDS premia. We derive this main finding using a proprietary set of individual CDS transactions cleared by the Depository Trust &amp; Clearing Corporation. We first show that CDS traders adjust the CDS premium in response to the observed order flow. Buy orders lead to an increase of the premium and sell orders to a decrease, suggesting that the order flow carries information. Second, we show that traders adjust the premium more for transactions with higher inventory risk. Third, trading with buy-side investors who presumably have less market power increases this effect. Overall, our results imply that CDS premia contain a significant non-default related component which CDS traders charge to protect themselves against informational and real frictions.</description>
      <pubDate>Mon, 29 Oct 2012 22:58:59 GMT</pubDate>
    </item>
    <item>
      <title>Catharsis - The real effects of bank insolvency and resolution</title>
      <link>http://hdl.handle.net/10419/74801</link>
      <description>Title: Catharsis - The real effects of bank insolvency and resolution
&lt;br/&gt;
&lt;br/&gt;Authors: Korte, Josef
&lt;br/&gt;
&lt;br/&gt;Abstract: In general, banks play a growth-enhancing role for the real economy. However, distorted incentives for banks, depositors, and regulators in connection with bank insolvency may corrupt banks' credit allocation and monitoring decisions, leading to suboptimal real economic outcomes. A rules-based prompt resolution regime for insolvent banks may reestablish the incentive system and provide for economically superior credit allocation and monitoring. We test the hypothesis that regulatory insolvency has a cathartic effect using a large firm-level dataset and proposing a new indicator to measure the strength of catharsis. Employing an instrumental variable setup and an interaction approach, we try to overcome concerns about causality and potential endogeneity which are usually inherent to research into the real economic implications of bank regulation. We find a comparably stronger implementation of a hypothetical positive capital closure rule to have a positive and statistically as well as economically significant effect on individual firm growth - particularly for firms that are structurally more dependent on bank financing. Our findings are robust to various specifications. Investigating the transmission channels of the 'catharsis effect', we find that it essentially works through benefiting better quality firms and reallocating credit towards firms that need it most. Additional analyses suggest that the 'catharsis effect' works best in open banking systems that provide high access to international finance and, hence, mitigate potentially negative credit supply effects of insolvent bank liquidation. Taken together, our findings advocate stronger attention being given to incentive-compatible bank resolution regimes.</description>
      <pubDate>Mon, 29 Oct 2012 22:58:59 GMT</pubDate>
    </item>
    <item>
      <title>Evaluation of minimum capital requirements for bank loans to SMEs</title>
      <link>http://hdl.handle.net/10419/74800</link>
      <description>Title: Evaluation of minimum capital requirements for bank loans to SMEs
&lt;br/&gt;
&lt;br/&gt;Authors: Düllmann, Klaus; Koziol, Philipp
&lt;br/&gt;
&lt;br/&gt;Abstract: Our paper addresses firm size as a driver of systematic credit risk in loans to small and medium enterprises (SMEs). Key contributions are the use of a unique data set of SME lending by over 400 German banks and relating systematic risk to the size dependence of regulatory capital requirements. What sets our sample apart is its comprehensive coverage of the particularly rich and well developed credit market for SMEs in Germany. We estimate asset correlations as the key measure of systematic risk from historical default rates. Our results suggest that systematic risk tends to increase with firm size, conditional on the respective rating category. We also compare the size of this effect with the capital relief that has been granted in Basel II for SMEs relative to large firms. For SME loans in the corporate portfolio of the Internal Ratings-Based Approach and also for SME loans treated under the revised standardized approach of Basel II, our asset correlation estimates suggest a significantly larger relative difference from large firms than reflected in the regulatory capital requirements.</description>
      <pubDate>Mon, 29 Oct 2012 22:58:59 GMT</pubDate>
    </item>
    <item>
      <title>The price impact of CDS trading</title>
      <link>http://hdl.handle.net/10419/74802</link>
      <description>Title: The price impact of CDS trading
&lt;br/&gt;
&lt;br/&gt;Authors: Gündüz, Yalin; Nasev, Julia; Trapp, Monika
&lt;br/&gt;
&lt;br/&gt;Abstract: In this paper we show that informational and real frictions in CDS markets strongly affect CDS premia. We derive this main finding using a proprietary set of individual CDS transactions cleared by the Depository Trust &amp; Clearing Corporation. We first show that CDS traders adjust the CDS premium in response to the observed order flow. Buy orders lead to an increase of the premium and sell orders to a decrease, suggesting that the order flow carries information. Second, we show that traders adjust the premium more for transactions with higher inventory risk. Third, trading with buy-side investors who presumably have less market power increases this effect. Overall, our results imply that CDS premia contain a significant non-default related component which CDS traders charge to protect themselves against informational and real frictions.</description>
      <pubDate>Mon, 29 Oct 2012 22:58:59 GMT</pubDate>
    </item>
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