The Effect of Derivative Instrument Use on Capital Market Risk: Evidence from Banks in Emerging and Recently Developed Countries
37 Pages Posted: 19 Dec 2012
Date Written: October 1, 2012
This study investigates the use of derivative instruments by banks in both emerging and recently developed countries in terms of capital market risk. Overall, the results indicate that the use of options increases total return risk and unsystematic risk, while the use of forwards and futures decreases total return risk. Swaps, in the meantime, negatively affect systematic risk. The main conclusion is that banks in the sample do not appear to be at risk by using derivative instruments.
Keywords: Derivatives, Bank, Capital market risk, Panel econometrics
JEL Classification: G21, G32
Suggested Citation: Suggested Citation