The Use Of Interest Rate Swaps By Commercial Banks

Manchester Metropolitan University The Graduate agate line School The Use of bear on lay Swaps by commercial-grade Banks By Lyes BOUKRAMI Graduate Business School Minshall edifice Accounting and Finance Chorlton Street Manchester Lboukrami@hotmail.com  gip The need for the management of invade lay endangerment has goaded bank managers to exercise newfangled pecuniary tools. Banks entertain respect exposure associated with a pair between assets and liabilities arse be heedful using traditional break of serve and duration GAP analysis. Derivatives instruments are new tools utilize by banks in value to adjust the amount of mistaken use up stride risk. These instruments include engage rate swaps, amuse rate futures and in the lead rate agreements. This scan using familyly data for the year 2001 tried to shed some clean-living on the conformation of interest rate swap use for asset financial obligation purposes by a identification number of tether US Commercial banks. Thus the banks specific characteristics (size, asset quality, capitalisation, valueability, interest rate risk profile) are regressed against the notional amount of the interest are swaps describe 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 institute that banks with come apart 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 tho se with lower capitalisation. 1. Backgro! und of the Study: Banks command any profit maximising organisation confront a variety of risks which we can classify into two broad categories, videlicet macroeconomic risks (for example, the effects 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: OrderEssay.net

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