Morrison, Alan (2005) Credit Derivatives, Disintermediation, and Investment Decisions. The Journal of Business (Chicago), 78 (2). pp. 621-648.
The credit derivatives market provides a liquid but opaque forum for secondary market trading of banking assets. I show that, when entrepreneurs rely on the certification value of bank debt to obtain cheap bond market finance, the existence of a credit derivatives market may cause them to issue sub-investment grade bonds instead and engage in second-best behavior. Credit derivatives can therefore cause disintermediation and thus reduce welfare. I argue that this effect can be most effectively countered by the introduction of reporting requirements for credit derivatives.
|Keywords:||bonds; futures; derivatives; securities; finance|
|Centre:||Oxford University Centre for Corporate Reputation|
|Date Deposited:||12 Dec 2011 11:26|
|Last Modified:||01 Mar 2017 10:25|
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