Credit Derivatives in the Economics of Financial System: Innovation and Issues (I Credit Derivatives Nell'Economia Dei Sistemi Finanziari Tra Innovazione e Criticità)

Abstract

This paper aims to investigate the role of credit derivatives in the economy of financial systems. Credit derivatives are a form of financial innovation that impacts on financial intermediation and banking, particularly. Credit derivatives market make it possible to transfer credit risk without transferring credit exposures. This opens up a variety of corporate decisions to disintegrate the value chain of credit intermediation and diversify loan portfolios. However, this not always lead to better management of credit risk and efficient allocation of risk in the economy. The financial crisis has shown how the credit risk transfer market can endanger the soundness and stability of financial intermediaries and the overall financial system.

Note: Downloadable document is in Italian.

Keywords: risk transfer, credit derivatives, financial innovation, financial crisis, risk management

JEL Classification: G01, G20, G21, G32