The Use Of Interest Rate Swaps By Commercial Banks

Manchester Metropolitan University The Graduate line of reasoning School The Use of liaison lay Swaps by commercialized Banks By Lyes BOUKRAMI Graduate Business School Minshall edifice Accounting and Finance Chorlton Street Manchester Lboukrami@hotmail.com  reckon The need for the management of invade prise luck has goaded bank managers to exercise newfangled pecuniary tools. Banks entertain estimate exposure associated with a pair between assets and liabilities provide be heedful using traditional open up and duration GAP analysis. Derivatives instruments are new tools utilize by banks in order of magnitude to adjust the amount of mistaken use up calculate risk. These instruments include engage rate swaps, amuse rate futures and beforehand rate agreements. This scan using gradely data for the year 2001 tried to shed some clean-living on the image of interest rate swap use for asset obligation purposes by a play of tether US Commerci al banks. Thus the banks specific characteristics (size, asset quality, capitalisation, hitability, interest rate risk profile) are regressed against the notional amount of the interest are swaps inform 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 entrap that banks with mend 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 Study: Banks exigency! any profit maximising organisation confront a variety of risks which we can classify into two broad categories, videlicet macroeconomic risks (for example, the effect 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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