Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212347 
Year of Publication: 
2016
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 9/2016
Publisher: 
Bank of Finland, Helsinki
Abstract: 
Do banks use credit default swap hedging to substitute for loan sales? By tracking banks' lending exposures and CDS positions on individual firms, we find that banks use CDS hedging to complement rather than to substitute for loan sales. Consequently, bank loan sales are higher for firms that are actively traded in the CDS market. In addition, we find evidence that suggests that banks sell CDS protection as credit enhancements to facilitate loan sales. This study employs identification strategies similar to the "twin study" design to separate the effects of borrower-side and lender-side factors, and to minimize the omitted-variables bias.
JEL: 
G14
G21
G23
G28
G32
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-104-7
Document Type: 
Working Paper

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