Interest Rate Risk Management and the Use of Derivative Securities

Ioana-Diana Pãun () and Ramona Gogoncea ()
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Ioana-Diana Pãun: University of Economic Studies, Bucharest, Romania
Ramona Gogoncea: University of Economic Studies, Bucharest, Romania

Economia. Seria Management, 2013, vol. 16, issue 2, 242-254

Abstract: This study aims to demonstrate the utility of derivative financial instruments for the management of interest rate risk that is faced by banks and financial institutions, and to provide an efficient flow of monitoring and control thereof. Banking institutions can now use a combination of balance sheet and off balance sheet measures, i.e. gap method, of interest rate risk management, in order to control exposure of short-term rates and derivatives to control the residual interest rate exposures. The result of the study shows that banks can achieve better diversification and risk management using derivatives.

Keywords: interest rate risk; banking industry; derivative securities; risk management. (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:rom:econmn:v:16:y:2013:i:2:p:242-254

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