Abstract
This paper analyzes the impact of European Credit Derivatives issuance on the financial market stability. Based on the relationship between CDOs (Collateralized Debt Obligation) issuance volumes, market volatility, Europe 6-month risk-free interest rate and the stability of financial market, this paper uses coexceedances method and the Multiple Logit model. We find that CDOs issuance is positively related to the negative coexceedances, suggesting that the greater amount of CDOs issuance, the greater impact on financial stability. CDOs issuance is not related to the positive coexceedances, indicating that the risk management of banks through CDOs is limited. In addition, the asymmetric information and risk-free interest rate also affect the stability of financial market.
The National Social Science Fund of China. "Study of counterparty default, liquidity risk impact and valuation of credit default swaps in international credit derivatives market."(11BGJ013).
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Alan, D.M.: Credit Derivatives. Disintermediation and Investment Decisions Journal of Business 2, 621–648 (2005)
Allen, F., Elena, C.: Credit risk transfer and contagion. Journal of Monetary Economics 53, 89–111 (2006)
Anthony, M.S., Trester, J.J.: Financial Innovation and Bank Risk Taking. Journal of Economic Behavior&Organization 1, 25–37 (1998)
Bae, K., Andrew, G., Rene, K., Stul, M.: A new Approach to Measuring Financial Contagion. Review of Financial Studies 3, 717–763 (2003)
Baur, D., Joossens, E.: The Effect of Credit Risk Transfer on Financial Stability. EUR Working Paper No. 21521 (2005)
Gregory, R.D., Zhou, C.: Credit derivatives in banking: Useful tools for managing risk? Journal of Monetary Economics 1, 25–54 (2001)
Risk, I.N., Hedging: Do Credit Derivatives Increase Bank Risk? Journal of Banking & Finance 2, 333–345 (2005)
Jin, Z., Zhang, T.: The significance of Credit derivatives market development to financial stability. China Finance 8, 15 (2007)
King, W.A., Wadhwani, S.: Transmission of volatility between stock markets. Review of Financial Studies 31, 5–33 (1990)
Richard, T.B., Ramon, P.D.: Stock Returns and Volatility. Journal of Financial and Quantitative Analysis 25, 203–214 (1990)
Wolf, W., Ian, W.M.: Credit Risk Transfer and Financial Sector Performance. CEPR Working Paper No. 4265 (2004)
Wang, Q.: Application of STATA in statistical and quantitative analysis. Nankai University Press (2007)
Wu, H.: Credit risk transformation of credit derivatives on financial stability. Economic Survey 6, 149–152 (2008)
Xu, R.: New Development of financial stability-The Theory of credit risk transfer review. Teaching and Research 7(7), 84–89 (2008)
Yang: China. Empirical Study of securities market industry coexceedances. Zhongnan University of Economics and Law 4, 87–92 (2009)
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2012 Springer-Verlag GmbH Berlin Heidelberg
About this paper
Cite this paper
Xing, Y., Yuqin, Z. (2012). The Impact of Credit Derivatives Issuance on Financial Institutions. In: Zhu, M. (eds) Business, Economics, Financial Sciences, and Management. Advances in Intelligent and Soft Computing, vol 143. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-27966-9_19
Download citation
DOI: https://doi.org/10.1007/978-3-642-27966-9_19
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-27965-2
Online ISBN: 978-3-642-27966-9
eBook Packages: EngineeringEngineering (R0)