Credit risk and bank margins in structured financial products: Evidence from the German secondary market for discount certificates
Year: 2008
Type: article
Abstract: This study analyzes bank margins in the German secondary market for exchange‐traded structured financial products, with particular emphasis on the influence of banks' credit risk. A structural model allowing for the incorporation of correlation effects between market and credit risk is applied to compare quoted and fair theoretical prices. For discount certificates, as the most popular type of structured financial products in Germany, an empirical study is conducted. Compared to earlier studies, total margins are found to be rather low, whereas the portion that draws back to credit risk appears to be a material part of the total margin. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28: 376–397, 2008
Source: Journal of Futures Markets
DOI: 10.1002/fut.20309
Authors: Rainer Baule, Oliver Entrop, Marco Wilkens
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2138090810