TITLE

Derivative activities and the risk of international banks: A market index and VaR approach

AUTHOR(S)
Reichert, Alan; Shyu, Yih-Wen
PUB. DATE
December 2003
SOURCE
International Review of Financial Analysis;2003, Vol. 12 Issue 5, p489
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The results of a comparison of international banks using a three-factor multi-index model and a modified value-at-risk (VaR) analysis indicate that the use of options increases the interest rate beta for all banks, while both interest rate and currency swaps generally reduce risk. The results are the strongest and the most consistent for U.S. dealer banks, followed by European banks, and then Japanese banks. Furthermore, the evidence suggests that the VaR approach to risk management can effectively be used by both domestic as well as international banks, although the results appear to be somewhat sensitive to the regulatory environment in which the bank operates.
ACCESSION #
10800115

 

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