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

Frederik Lundtofte

Research output: Contribution to journalArticlepeer-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. (C) 2014 Elsevier Inc. All rights reserved.
Original languageEnglish
Pages (from-to)249-263
JournalThe North American Journal of Economics and Finance
Volume31
DOIs
Publication statusPublished - 2015

Subject classification (UKÄ)

  • Economics

Free keywords

  • Risk pooling
  • Probability of default
  • Default correlation
  • Corporate
  • debt

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