| his dissertation investigates the relationship between credit derivatives and bank portfolio performance at the bank holding company (BHC) level; it examines the moral hazard problem caused by BHCs' use of credit derivatives as a risk management tool. With the major changes in industry regulation in the last two decades, the United States banking system has begun to take on a new look. During this period, the number of banks has declined; however, there has been significant growth in "mega banks," which include the large BHCs. While diversification (geographic and asset) can reduce risk, it can create challenges for uniformity in decision making across operations. Additionally, larger investments in the organizational structure are expected to lead to larger operational expenses which could, in turn, suggest a greater incentive for banks to speculate with off-balance-sheet hedges to offset shrinking margins. The growth of the global credit derivatives market has surpassed previous expectations, outstripping industry predictions of... |
