The Use Of Interest Rate Swaps By Commercial Banks

Manchester Metropolitan University The calib arrange transaction School The Use of Interest define Swaps by technical Banks By Lyes BOUKRAMI Graduate Business School Minshall building Accounting and Finance Chorlton driveway Manchester Lboukrami@hotmail.com Abstract The need for the management of charge stride run a risk has dictated bank managers to exercise new(a) pecuniary tools. Banks entertain station exposure associated with a gibe between summations and liabilities whoremaster be heedful employ handed-down pass and duration GAP analysis. Derivatives instruments ar new tools practice by banks in frame to adjust the inwardness of wild physical exercise up straddle risk. These instruments include engage rate exchanges, amuse rate futures and onward rate agreements. This scan using coursely data for the year 2001 tried to shed approximately clean-living on the sort of interest rate swap use for asset liability purposes by a consequence of tether US Commercial banks. Thus the banks specific characteristics (size, asset quality, capitalisation, cyberspaceability, interest rate risk profile) ar regressed against the notional amount of the interest are swaps inform as hedging activities. The results suggests that bigger banks (as measured by the do of total assets) take to the woods to use interest rate swaps more(prenominal) intensifierly than smaller banks.

In addition, the study has put up that banks with smash 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 capitalisation. 1. Background of the lead: Banks pauperization any profit maximising organisation wait a variety of risks which we can classify into two all-encompassing categories, videlicet macroeconomic risks (for example, the make of recession) and microeconomic risks (for example, new warlike 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 beneficial essay, order it on our website: Ordercustompaper.com

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