Derivatives holdings and market values of U.S. bank holding companies. Issue 49 (20th October 2016)

• Record Type: Journal Article
• Authors: Choi, Wonho Wilson; Kim, Jinyong; Kim, Mingook
• Is Part Of: Applied economics. Volume 48:Issue 49(2016)
• Page Start: 4747
• Page End: 4757
• Publication Date: 2016-10-20
• Subjects: Derivative holdings -- holding purposes -- underlying asset types -- market values -- bank holding companies; G20 -- G21; Economics -- Periodicals; 330
• DOI: 10.1080/00036846.2016.1164822
• Languages: English
• ISSNs: 0003-6846

Abstract

ABSTRACT: We examine the impact of derivatives held by US bank holding companies on their market valuations over the period 2000 to 2010. By using bank-level data with detailed information on the notional amounts of derivative positions according to holding purposes and underlying asset types, our regression analyses provide three main findings. First, derivative instruments held for hedging rather than trading purposes contribute to enhancing market values. Second, the positive effects exhibit nonmonotonic patterns indicating that excessive amounts of derivatives holdings deteriorate market values. Third, interest rate derivatives are the main source of high valuations.