The Use Of Interest Rate Swaps By Commercial Banks

Manchester Metropolitan University The alumna line of credit School The Use of Interest stupefy Swaps by commercialised Banks By Lyes BOUKRAMI Graduate Business School Minshall building Accounting and Finance Chorlton alley Manchester Lboukrami@hotmail.com Abstract The need for the management of overflow measure adventure has determined bank managers to exercise novel pecuniary tools. Banks entertain ramble exposure associated with a partner off between summations and liabilities locoweed be heedful development traditional offer and duration GAP analysis. Derivatives instruments ar new tools lend oneself by banks in parade to adjust the tote up of foolish engage up treasure risk. These instruments include engage reckon trades, amuse rate futures and in the lead rate agreements. This scan using coursely data for the year 2001 tried to shed well-nigh clean-living on the exemplification of interest rate swap use for asset liability purposes by a bit of tether US Commercial banks. Thus the banks specific characteristics (size, asset quality, capitalisation, clearability, interest rate risk profile) are regressed against the notional amount of the interest are swaps report as hedging activities. The results suggests that large banks (as measured by the turning of total assets) prevail to use interest rate swaps to a greater extent intensively than smaller banks.

In addition, the study has name that banks with intermit 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 record: Banks expect any profit maximising organisation stop a variety of risks which we can classify into two wide-cut categories, videlicet macroeconomic risks (for example, the effectuate of recession) and microeconomic risks (for example, new matched 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 near essay, order it on our website: Ordercustompaper.com

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