Derivative activities and Asia-Pacific banks' interest rate and exchange rate exposures

Au Yong, Hue Hwa, Faff, Robert and Chalmers, Keryn (2009) Derivative activities and Asia-Pacific banks' interest rate and exchange rate exposures. Journal of International Financial Markets, Institutions and Money, 19 1: 16-32. doi:10.1016/j.intfin.2007.08.002


Author Au Yong, Hue Hwa
Faff, Robert
Chalmers, Keryn
Title Derivative activities and Asia-Pacific banks' interest rate and exchange rate exposures
Journal name Journal of International Financial Markets, Institutions and Money   Check publisher's open access policy
ISSN 1042-4431
1873-0612
Publication date 2009-02
Year available 2007
Sub-type Article (original research)
DOI 10.1016/j.intfin.2007.08.002
Volume 19
Issue 1
Start page 16
End page 32
Total pages 17
Place of publication Amsterdam, Netherlands
Publisher Elsevier BV
Language eng
Abstract In this paper, we investigate whether the level of derivative activities of Asia-Pacific banks is associated with the market's perception of their interest rate and exchange rate risks. The results suggest that the level of derivative activities (especially interest rate derivatives) is positively associated with long-term interest rate exposure (LTIR) but negatively associated with short-term interest rate exposure (STIR). Further investigations reveal that the positive LTIR exposures are driven by banks with extensive derivative activities. We do not find any significant association between banks' derivative activities and exchange rate exposure. The significant positive association between the level of derivative activities and LTIR suggests the need for better management of banks' internal control systems and/or greater derivative disclosure requirements to bring stronger market discipline to banks, particularly for banks with extensive derivative activities. © 2007 Elsevier B.V. All rights reserved.
Keyword Derivatives
Asia-Pacific banks
Interest rate exposure
Exchange rate exposure
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Unknown
Additional Notes Available online 19 August 2007

Document type: Journal Article
Sub-type: Article (original research)
Collection: UQ Business School Publications
 
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Created: Thu, 03 Mar 2011, 14:26:12 EST by Karen Morgan on behalf of UQ Business School