Why Do Banks Use Derivatives? An Analysis of the Italian Banking System

Infante, Luigi; Piermattei, Stefano; Santioni, Raffaele; Sorvillo, Bianca

doi:10.2139/ssrn.3212651

Cited by 1 publication

(2 citation statements)

References 24 publications

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“…The first group of participants affected by derivatives consists of financial institutions. As it is stated by Infante et al (2018), banks participate in the derivatives market to hedge against unexpected changes in economic variables, trading, and broker-dealer activities. The main risks hedged by financial institutions using derivatives include interest rate risk and credit risk.…”

Section: Literature Reviewmentioning

confidence: 99%

“…The main risks hedged by financial institutions using derivatives include interest rate risk and credit risk. Moreover, derivatives are sometimes specified as an alternative for capital and liquidity hedging (Infante et al, 2018). Generally speaking, banks in emerging markets can reduce volatility by using derivatives (Bazih and Vanwalleghem, 2021).…”

Section: Literature Reviewmentioning

confidence: 99%

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Assessment of the impact of the usage of derivatives on the company’s value

Šimaitė

Keliuotytė-Staniulėnienė

2022

FMIR

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During periods of increased uncertainty, financial market participants are looking for ways to manage risk. The derivatives can be considered as one of the potential instruments for hedging risk. There is no consensus in the scientific literature on whether the application of derivatives has an impact on a value of a company. Thus, the main purpose of this paper is to quantitatively assess the impact of the application of derivatives on the value of a company. The research hypothesis is formulated as follows: the use of derivatives increases the company’s value, i.e. the application of derivatives has a statistically significant positive impact on the value of the company. Seeking to achieve the main purpose and test the hypothesis, besides the analysis of relevant academic literature, the method of panel data analysis (linear multiple regression) is used to quantitatively assess the effect the application of derivatives has made on the company’s value. 28 companies (constituents of EURO STOXX 50 ESG Index) are analyzed in the period of 2005-2020. The results of the research allow stating the effect of derivatives on the value of companies has proven to be statistically significant and positive.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%