Derivatives-hedging, risk allocation and the cost of debt: Evidence from bank holding companies

Deng, Saiying; Elyasiani, Elyas; Mao, Connie X.

doi:10.1016/j.qref.2016.06.004

Cited by 18 publications

(23 citation statements)

References 32 publications

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“…The estimated sensitivities (betas) are then regressed on set of bank characteristics and either a dummy variable denoting that the bank is a derivatives user or the total notional value of the bank's derivatives holdings. Research conducted by Li and Marinč (2014) and Deng et al (2017) provide evidence inconsistent with the hypothesis that banks use derivatives to hedge risk. This is interpreted as an increase in interest rate risk because of derivative usage.…”

Section: Bank Derivative Usagementioning

confidence: 92%

“…Hentschel and Kothari (2001) fail to find any support for the hypothesis that estimated market, interest rate or foreign currency betas differ among bank derivative and non-derivative users. Research conducted by Li and Marinč (2014) and Deng et al (2017) provide evidence inconsistent with the hypothesis that banks use derivatives to hedge risk.…”

Section: Bank Derivative Usagementioning

confidence: 92%

“…Two recent papers have examined the relationship between a bank's derivatives activities, their systematic and nonsystematic risk, and their cost of debt. Deng, Elyasiani, and Mao (2017) utilize bond data assembled for 148 publically traded, U.S. bank holding companies for the years 1996-2011. The authors present evidence that greater use of interest rate, exchange rate, and credit derivatives is positively related to systematic interest rate, exchange rate, and credit risk.…”

Section: Assessing Bank Riskmentioning

confidence: 99%

“…The authors present evidence that greater use of interest rate, exchange rate, and credit derivatives is positively related to systematic interest rate, exchange rate, and credit risk. Deng, Elyasiani, and Mao (2017) utilize bond data assembled for 148 publically traded, U.S. bank holding companies for the years 1996-2011. The authors report results indicating that banks, as risk managers, do not hedge to reduce risk.…”

Section: Assessing Bank Riskmentioning

confidence: 99%

See 3 more Smart Citations

Bank risk, financial stress, and bank derivative use

Bliss

Clark

DeLisle

2018

Journal of Futures Markets

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This paper distinguishes hedging from speculative derivative usage by U.S. bank holding companies (BHCs). This is accomplished by implementing a multi‐step procedure that relates the implied volatility from options on these banks, the broad components of the Cleveland Federal Reserve Bank Financial Stress Index, and off‐balance sheet derivatives. Our results indicate that BHCs with positive risk exposure to various financial stresses generally use interest rate, foreign exchange, equity, commodity, and credit derivatives to reduce their risk exposure to these financial stresses.

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Section: Bank Derivative Usagementioning

confidence: 92%

Section: Bank Derivative Usagementioning

confidence: 92%

Section: Assessing Bank Riskmentioning

confidence: 99%

Section: Assessing Bank Riskmentioning

confidence: 99%

See 2 more Smart Citations

Bank risk, financial stress, and bank derivative use

Bliss

Clark

DeLisle

2018

Journal of Futures Markets

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“…A huge number of studies have presented evidence that provides support for this rationale to hedge, amongst others Fok et al (1997), Goldberg et al (1998), Haushalter et al (2002), Sprčić, Tekavčič, and Šević (2008b), Singh and Upneja (2008), Afza and Alam (2011), Chernenko and Faulkender (2012), Chaudhry et al (2014), Deng et al (2016).…”

Section: D) Costly External Financingmentioning

confidence: 98%

The Impact of Regulation on Corporate Hedging Activities and the Response of Corporates – A Preliminary Conceptual Framework

Kifle

2017

BMR

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Following the financial crisis of 2007/2008 regulators intensified the regulation of financial derivatives through (i) the implementation of the European Markets Infrastructure Directive (EMIR) to increase transparency of over-the-counter (OTC) derivatives and (ii) the implementation of Basel III to increase capital underpinning. Non-financial corporates, who mainly hedge with OTC derivatives, are seeing tendencies of increasing costs and decreasing availability of required OTC derivatives but fail to have a full concept of the impact and possible responses to manage the impact. Also, theoretical research did not consider reguation as an influencing factor and thus does not offer theories to analyse the impact of regulation on corporate hedging activities (defined as the willingness and ability of NFCs to conduct hedging in an optimal way). Given this gap, this paper reviews existing theories and based on that pre-conceptualises a model that helps to analyse the impact of regulation on corporate hedging activities and provides a preliminary conceptual framework that includes corporate responses to manage the regulatory impact.

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Securitization and CDS in U.S. bank lending

Tommaso

2020

Int. J Fin Econ

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Using a sample of quarterly observations of U.S. bank holding companies (BHCs), we investigate the effect of securitization and CDS on credit supply. Furthermore, we test the hypothesis that securitization and CDS have a different effect on the U.S. bank's lending. The use of CDS and securitization boosts lending cyclicality, reduces the credit supply and amplifies the cyclicality of bank credit supply, particularly in period of financial stress. Furthermore, the worst effect on U.S. bank lending is caused by the use of CDS. We find empirical evidence of effects of CDS and securitization on the bank lending channel following changes in monetary policy.

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Derivatives-hedging, risk allocation and the cost of debt: Evidence from bank holding companies

Cited by 18 publications

References 32 publications

Bank risk, financial stress, and bank derivative use

Bank risk, financial stress, and bank derivative use

The Impact of Regulation on Corporate Hedging Activities and the Response of Corporates – A Preliminary Conceptual Framework

Securitization and CDS in U.S. bank lending

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