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Frontiers of Risk Management, Volume I
book

Frontiers of Risk Management, Volume I

by Dennis Cox
July 2018
Intermediate to advanced content levelIntermediate to advanced
256 pages
6h 22m
English
Business Expert Press
Content preview from Frontiers of Risk Management, Volume I

CHAPTER 13

Overcoming the Challenges in the Credit Derivatives Market

Pontus Eriksson

SunGard FRONT ARENA

A Bird’s-Eye View of the Credit Derivatives Market

There are many obvious advantages to an expanding credit derivatives market. The main advantage is that financial institutions can meet investor demands, for example:

  • investors can hedge credit risk in isolation from other risk types;
  • banks can sell off credit risk without consent from the ­borrower; and
  • banks can tailor and originate synthetic credit risk.

There are, however, opposite forces, which include increased operational risk, coupled with a heavier burden of capital allocation, something that could hamper the profits of a bank. While it is probably fair to say that the benefits ...

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Publisher Resources

ISBN: 9781947098473