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Title:Hedging with Credit Derivatives and its Strategic Role in Banking Competition PDF Logo
Authors:Pausch, Thilo
Schweimayer, Gerhard
Issue Date:2004
Series/Report no.:Volkswirtschaftliche Diskussionsreihe / Institut für Volkswirtschaftslehre der Universität Augsburg 260
Abstract:The tremendous growth of markets for credit derivatives since the mid 1990's has raised questions regarding the role of these instruments in the banking in- dustry which is heavily exposed to credit risk. However, while recent literature mainly focused on pricing and optimal decisions regarding volumes of credit derivatives the present paper centers the strategic role of these instruments in the competition between banking firms. We use a duopolistic version of the industrial organization approach to banking to find out that credit derivatives may influence banking competition. For this result to hold observability of the volume of credit derivatives held by banks is not necessary.
Subjects:bank
risk
duopoly
hedging
JEL:L1
D40
D21
G21
D43
Document Type:Working Paper
Appears in Collections:Volkswirtschaftliche Diskussionsreihe, Universität Augsburg

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