Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/193565
Authors: 
Aldasoro, Iñaki
Barth, Andreas
Year of Publication: 
2017
Series/Report no.: 
ESRB Working Paper Series 58
Abstract: 
This paper analyzes banks' usage of CDS. Combining bank-firm syndicated loan data with a unique EU-wide dataset on bilateral CDS positions, we find that stronger banks in terms of capital, funding and profitability tend to hedge more. We find no evidence of banks using the CDS market for capital relief. Banks are more likely to hedge exposures to relatively riskier borrowers and less likely to sell CDS protection on domestic firms. Lead arrangers tend to buy more protection, potentially exacerbating asymmetric information problems. Dealer banks seem insensitive to firm risk, and hedge more than non-dealers when they are more profitable. These results allow for a better understanding of banks' credit risk management.
Subjects: 
syndicated loans
CDS
speculation
capital regulation
EMIR
cross-border lending
asymmetric information
JEL: 
G21
G28
Persistent Identifier of the first edition: 
ISBN: 
978-92-95210-45-5
Document Type: 
Working Paper

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