Vuillemey, G. (2015) “Do derivatives make the world safer?, VoxEU Organisation, 12 Φεβρουαρίου.
The interest rate derivatives market has grown tenfold over the past 15 years. These contracts are mostly held by commercial banks, raising financial stability concerns. This column discusses how hedging using derivatives affects bank lending and the occurrence of bank defaults.
The interest rate derivatives market is the largest market in the world, with an aggregate notional exposure of 563 trillion USD as of June 2014. Its fast growth over the past 15 years (shown in Figure 1) has raised concerns from policymakers. Currently, no theory provides guidance regarding the effect of the use of derivatives on other decisions by financial intermediaries.
In a recent paper, I develop a framework to show how hedging using interest rate derivatives affects:
Risk management in banking,
The response of bank lending (both to interest rate and real shocks), and
The occurrence of bank defaults.
Σχετικές αναρτήσεις:
- The Editors: “Europe’s Crazy Finance Tax“, Bloomberg View, 02 Νοεμβρίου 2014.
- Atkeson, Α., Eisfeldt, Α. & Weill, P. O. (2014) “Entry and Exit in OTC Derivatives Markets“, VoxEU Organisation, 17 Σεπτεμβρίου.
- Murphy, D., Vasios, M. & Vause, N. (2014) “An investigation into the procyclicality of risk-based initial margin models“, VoxEU Organisation, 06 Ιουνίου.