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

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Author

  • Frederik Lundtofte

Summary, in English

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.

Publishing year

2015

Language

English

Pages

249-263

Publication/Series

The North American Journal of Economics and Finance

Volume

31

Document type

Journal article

Publisher

Elsevier

Topic

  • Economics

Keywords

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

Status

Published

ISBN/ISSN/Other

  • ISSN: 1062-9408