Pricing and Hedging of Contingent Credit Lines
January 1, 2006
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Summary
Contingent credit lines (CCLs) are widely used in bank lending and also play an important role in the functioning of short-term capital markets. Yet, their pricing and hedging has not received much attention in the finance literature. Using a financial engineering approach, the paper analyzes the structure of simple CCLs, examines methods for their pricing, and discusses the problems faced in hedging CCL portfolios.
Subject: Banking, Credit, Credit risk, Financial institutions, Financial regulation and supervision, Lines of credit, Loans, Money, Options
Keywords: CCL characteristic, CCL contract, CCL facility, CCL price, CCL structure, companies credit-worthiness, Contingent credit line (CCL), CP market, Credit, credit risk, financial condition, forward rate, hedging, Lines of credit, Loans, Options, pricing, WP
Pages:
26
Volume:
2006
DOI:
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Issue:
013
Series:
Working Paper No. 2006/013
Stock No:
WPIEA2006013
ISBN:
9781451862737
ISSN:
1018-5941
