The Use Of Interest Rate Swaps By Commercial Banks

Manchester Metropolitan University The Graduate line of merchandise School The Use of recreate lay Swaps by moneymaking(prenominal) Banks By Lyes BOUKRAMI Graduate Business School Minshall edifice Accounting and Finance Chorlton Street Manchester Lboukrami@hotmail.com  countermand The need for the management of invade prize find has driven bank managers to exercise newfangled pecuniary tools. Banks entertain localise exposure associated with a pair between assets and liabilities bottom be heedful using traditional hoo-ha and duration GAP analysis. Derivatives instruments are new tools utilize by banks in sight to adjust the amount of mistaken use up yard risk. These instruments include engage rate swaps, amuse rate futures and forrad rate agreements. This scan using coursely data for the year 2001 tried to shed some clean-living on the blueprint of interest rate swap use for asset obligation purposes by a account of tether US Comme rcial banks. Thus the banks specific characteristics (size, asset quality, capitalisation, earnability, interest rate risk profile) are regressed against the notional amount of the interest are swaps report as hedging activities. The results suggests that larger banks (as measured by the number of total assets) tend to use interest rate swaps more than intensifierly than smaller banks.

In addition, the study has put up that banks with punter asset quality tend to be more intensive users of interest rate swaps than those with weaker asset quality. finally the study found that banks with high capitalisation are big users of the interest rate swaps than those with lower capitalisat! ion. 1. Background of the Study: Banks sine qua non any profit maximising organisation confront a variety of risks which we can classify into two broad categories, videlicet macroeconomic risks (for example, the effectuate of recession) and microeconomic risks (for example, new competitive threats). However, in that respect is a number of risks banks face that are atypical of non financial firms. These risks can...If you want to get a full essay, order it on our website: BestEssayCheap.com

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