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Asset Securitisation as a Profits Management Instrument

  • Markus Schmidtchen
Conference paper
Part of the Contributions to Economics book series (CE)

The credit derivatives market has enjoyed a strong growth in liquidity for loan products and credit derivatives for some years now. A growing number of players populate both the supply and demand sides of the market, leading to product diversification on the one hand and a broadening of demand on the other. Rapid growth has been observed, in particular, in the single name credit default swap market, through which institutions can hedge against credit default by large, well-known enterprises.

However, the instrument that can be used to hedge against credit default by small and medium-sized enterprises (SMEs) is portfolio securitisation, through which loans or loan default risk are transferred as a package. One of the reasons for making a bundled transfer is the limited exposure to individual SMEs.

However, the instrument that can be used to hedge against credit default by small and medium-sized enterprises (SMEs) is portfolio securitisation, through which loans or loan default risk are transferred as a package. One of the reasons for making a bundled transfer is the limited exposure to individual SMEs.

In parallel with the development in the capital markets, many credit institutions are re-organising their credit risk management units. This is being driven, on the one hand, by the regulatory demands in credit risk measurement under Basel II. On the other hand, greater capital market liquidity is making loan products more mobile. Banks are conducting increasingly active credit portfolio management. For example, the capital market may be used to deliberately increase credit exposure by means of an investment or to deliberately reduce risk by loan securitisation. This enables a bank to optimise its credit portfolio, which in turn has a positive impact on its profits position.

Keywords

Capital Market Credit Rating Economic Capital Loss Distribution Income Statement 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Physica-Verlag Heidelberg 2009

Authors and Affiliations

  1. 1.KfW BankengruppeFrankfurtGermany

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