Banks' pooling of corporate debt: An application of the restated diversification theorem

Frederik Lundtofte

doi:10.1016/j.najef.2014.12.003

Banks' pooling of corporate debt: An application of the restated diversification theorem

Frederik Lundtofte^*

^*Corresponding author for this work

Research output: Contribution to journal › Journal article › Research › peer-review

Abstract

We analyze banks' pooling of corporate loans and propose Pareto-improving sharing rules that depend only on the relative sizes of the loans. Implementation of these sharing rules do not require any precise knowledge of default probabilities or default correlations.

Original language	English
Journal	North American Journal of Economics and Finance
Volume	31
Pages (from-to)	249-263
Number of pages	15
ISSN	1062-9408
DOIs	https://doi.org/10.1016/j.najef.2014.12.003
Publication status	Published - 1 Jan 2015
Externally published	Yes

Keywords

Corporate debt
Default correlation
Probability of default
Risk pooling

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10.1016/j.najef.2014.12.003

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title = "Banks' pooling of corporate debt: An application of the restated diversification theorem",

abstract = "We analyze banks' pooling of corporate loans and propose Pareto-improving sharing rules that depend only on the relative sizes of the loans. Implementation of these sharing rules do not require any precise knowledge of default probabilities or default correlations.",

keywords = "Corporate debt, Default correlation, Probability of default, Risk pooling",

author = "Frederik Lundtofte",

year = "2015",

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doi = "10.1016/j.najef.2014.12.003",

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AB - We analyze banks' pooling of corporate loans and propose Pareto-improving sharing rules that depend only on the relative sizes of the loans. Implementation of these sharing rules do not require any precise knowledge of default probabilities or default correlations.

KW - Corporate debt

KW - Default correlation

KW - Probability of default

KW - Risk pooling

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U2 - 10.1016/j.najef.2014.12.003

DO - 10.1016/j.najef.2014.12.003

M3 - Journal article

AN - SCOPUS:84919932985

SN - 1062-9408

VL - 31

SP - 249

EP - 263

JO - North American Journal of Economics and Finance

JF - North American Journal of Economics and Finance

ER -

Banks' pooling of corporate debt: An application of the restated diversification theorem

Abstract

Keywords

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