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An empirical analysis of bank hedging in futures markets

✍ Scribed by G. D. Koppenhaver

Publisher: John Wiley and Sons
Year: 1990
Tongue: English
Weight: 824 KB
Volume: 10
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.3990100102

No coin nor oath required. For personal study only.

✦ Synopsis

uch has been written about the use of futures contracts to manage the interest rate 'For theoretical contributions, see Hilliard (1984), Ho andSaunders (1983), Kolb andChiang (1982), and Koppenhaver (1985(a)). On a more practical level, Booth and Koveos (1986) develop a two-stage linear programming model of optimal cash and futures decisions made by a bank concerned with liquidity risk management.

?he latter empirical approach is more popular because the data requirements are less. For example, see the pioneering work of Ederington (1979) and the recent articles by Howard and D' Antonio (1986) and Overdahl and Starleaf (1986).

'The data in Table I overstates bank participitation in futures markets because over-the-counter forward contracts are included. On the other hand, the data in Table I excludes bank positions in foreign currency futures and so understates futures participation.

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