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

See all articles by Mohamed Rochdi Keffala

Mohamed Rochdi Keffala

University of Liverpool - Institute of Financial and Actuarial Mathematics

Christian de Peretti

University Claude Bernard Lyon 1; Ecole Centrale de Lyon

Chia-Ying Chan

Yuan-Ze University - Department of Finance

Date Written: October 1, 2012

Abstract

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

Keffala, Mohamed Rochdi and de Peretti, Christian and Chan, Chia-Ying, The Effect of Derivative Instrument Use on Capital Market Risk: Evidence from Banks in Emerging and Recently Developed Countries (October 1, 2012). Frontiers in Finance and Economics, Vol. 9, No. 2, 85-121. Available at SSRN: https://ssrn.com/abstract=2190440

Mohamed Rochdi Keffala (Contact Author)

University of Liverpool - Institute of Financial and Actuarial Mathematics ( email )

Peach Street
Liverpool, L697ZL
United Kingdom

Christian De Peretti

University Claude Bernard Lyon 1 ( email )

ISFA
50, Avenue Tony Garnier
Lyon Cedex 07, 69366
France
+33 (0)4 37 28 74 39 (Phone)
+33 (0)4 37 28 76 32 (Fax)

HOME PAGE: http://isfa.univ-lyon1.fr/laboratoire-saf/membres-permanents-38-1.html

Ecole Centrale de Lyon

36 avenue Guy de Collongue
Ecully, 69134
France
+33 (0)4 72 18 63 34 (Phone)
+33 (0)4 72 18 67 63 (Fax)

HOME PAGE: http://www.ec-lyon.fr

Chia-Ying Chan

Yuan-Ze University - Department of Finance ( email )

320 Chungli
Taiwan

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