engleski

The potential of credit default swap implementation in Croatia

Housing financing, due to its social character and the importance of housing, deserves special treatment. Many models, methods and instruments have been created for active credit risk management, credit risk insurance and/or credit risk transfer to the third parties. In this sense, credit risk is rather emphasized in the housing financing, reaching the highest exposures in times of price volatility on the real estate market. The reason behind this is a high share of mortgages, which represent the most popular credit risk insurance instrument in housing financing worldwide, as well as in Croatia. In recent times, activities on the credit derivatives market record a significantly positive trend in global terms, out of which credit default swaps segment outshines due to their utilization as one of the most popular credit risk transfer derivative instruments. The aim of this paper is to analyze credit risk insurance instruments used in Croatia and to point out their advantages and disadvantages, which can be a good starting point for realizing the necessity of their utilization, as well as for giving suggestions on introduction of new active credit risk management techniques and instruments. According to the contemporary world practice, the application of the credit default swap has been shown as a very popular technique to achieve that goal. The paper analyzes the credit default swap in more detail, as well as its implementation potential on Croatian financial market.

housing financing; credit risk; insurance instruments; credit default swap

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