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dc.contributor.authorWagner, Wolf
dc.date.accessioned2010-05-20T10:55:18Z
dc.date.available2010-05-20T10:55:18Z
dc.date.issued2005
dc.identifier.citationJEL classification: G21, G28en
dc.identifier.urihttp://www.dspace.cam.ac.uk/handle/1810/225165
dc.description.abstractThe emerging markets for credit derivatives have improved the liquidity of bank assets by providing banks with various new possibilities for selling and hedging their risks. This paper examines the consequences for banking stability. In a simple model where liquidation of bank assets is costly, we show that increased asset liquidity benefits stability by encouraging a representative bank to reduce the risks on its balance sheet. Stability is further enhanced because the bank can now liquidate assets in a crisis more easily. However, we find that these stability effects are counteracted by increased risk-taking by the bank. Overall, stability actually falls because the improved possibilities for liquidating assets in a crisis make a crisis less costly for the bank. The bank therefore takes on an amount of risk that more than offsets the initial positive impact on stability.en
dc.language.isoenen
dc.publisherCFAP, Cambridge Judge Business School, University of Cambridgeen
dc.relation.ispartofseriesCFAP Working Paperen
dc.relation.ispartofseries18en
dc.rightsAll Rights Reserveden
dc.rights.urihttps://www.rioxx.net/licenses/all-rights-reserved/en
dc.subjectfinancial innovationen
dc.subjectcredit derivativesen
dc.subjectrisk takingen
dc.subjectbank defaulten
dc.titleCredit derivatives, the liquidity of bank assets and banking stabilityen
dc.typeWorking Paperen
dc.type.versionpublished versionen


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