Title: Instruments of Credit Risk Transfer: Effects on Financial Contracting and Financial Stability
Abstract: We review the limited available literature relating to markets for credit risk transfer. These markets help to complete incomplete financial markets for credit risk by facilitating the isolation of credit risk from other risks and extending the opportunities to manage credit risk. Yet, CRT markets give rise to additional risk management problems, and they also create new asymmetric information problems. Pricing for some CRT instruments also remains difficult. We identify the new problems created by CRT markets in terms of their effects on relationships between borrowers and lenders and between lenders and credit protection sellers. We also discuss how different forms of CRT instruments or contracts mitigate the problems to differing degrees. Finally, we identify three channels through which CRT markets may have financial stability implications: Firms' access to finance; monetary-policy-transmission mechanisms; and interactions between markets.
Publication Year: 2003
Publication Date: 2003-01-01
Language: en
Type: article
Indexed In: ['crossref']
Access and Citation
Cited By Count: 21
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