Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70024
Authors: 
Pausch, Thilo
Welzel, Peter
Year of Publication: 
2002
Series/Report no.: 
Volkswirtschaftliche Diskussionsreihe, Institut für Volkswirtschaftslehre der Universität Augsburg 224
Abstract: 
Using the industrial organization approach to the microeconomics of banking we model a large (Monti-Klein) bank which is risk neutral and faces credit uncertainty in its loan business. The impact of capital adequacy regulation and the effect of changes in risk on deposit and loan rates are analyzed. We then show that capital adequacy regulation induces the bank to behave as if it were risk averse. Finally, we examine risk management with credit derivatives in the framework of the proposed New Basel Capital Accord where such hedging operations are explicitly accounted as reducing the risk position of a bank. In this environment separation and full hedge results are derived.
Subjects: 
credit risk
capital adequacy
regulation
risk aversion
JEL: 
G21
G28
Document Type: 
Working Paper

Files in This Item:
File
Size
163.12 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.