Bank Behavior with Access to Credit Risk Transfer Markets

One of the most important recent innovations in financial markets has been the development of credit derivative products that allow banks to more actively manage their credit portfolios than ever before.We analyze the effect that access to these markets has had on the lending behavior of a sample of banks, using a sample of banks that have not accessed these markets as a control group. We find that banks that adopt advanced credit risk management techniques (proxied by the issuance of at least one collateralized loan obligation) experience a permanent increase in their target loan levels of around 50%. Partial adjustment to this target, however, means that the impact on actual loan levels is spread over several years.Our findings confirm the general efficiency enhancing implications of new risk management techniques in a world with frictions suggested in the theoretical literature.credit risk transfer;risk management;bank lending

Bank Behavior with Access to Credit Risk Transfer Markets

One of the most important recent innovations in financial markets has been the development of credit derivative products that allow banks to more actively manage their credit portfolios than ever before.We analyze the effect that access to these markets has had on the lending behavior of a sample of banks, using a sample of banks that have not accessed these markets as a control group. We find that banks that adopt advanced credit risk management techniques (proxied by the issuance of at least one collateralized loan obligation) experience a permanent increase in their target loan levels of around 50%. Partial adjustment to this target, however, means that the impact on actual loan levels is spread over several years.Our findings confirm the general efficiency enhancing implications of new risk management techniques in a world with frictions suggested in the theoretical literature.

The Continuous Sample of Working Lives: improving its representativeness

This paper studies the representativeness of the Continuous Sample of Working Lives (CSWL), a set of anonymized microdata containing information on individuals from Spanish Social Security records. We examine several CSWL waves (2005-2013) and show that it is not representative for the population with a pension income. We then develop a methodology to draw a large dataset from the CSWL that is much more representative of the retired population in terms of pension type, gender and age. This procedure also makes it possible for users to choose between goodness of fit and subsample size. In order to illustrate the practical significance of our methodology, the paper also contains an application in which we generate a large subsample distribution from the 2010 CSWL. The results are striking: with a very small reduction in the size of the original CSWL, we significantly reduce errors in estimating pension expenditure for 2010, with a p value greater or equal to 0.999